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higher wage, she can afford to buy a new car even supplied) = 5 + 3P, then the equilibrium price is 3 and
though she is moving into a bigger apartment. equilibrium quantity is 14.
The accuracy of the economist’s prediction Problem. The government of Economica announces
depends on whether the chairs X Corporation produce that it will purchase its farmers’ surplus of milk, we can
are NORMAL GOODS… when an economist working for infer that Economica has a price floor ABOVE the
the firm predicts that “if people’s income rise next year, equilibrium price for milk.
then the demand for our chairs will increase (ceteris
paribus). [Remember] The price will adjust to bring the market to
equilibrium if it is NOT in equilibrium.
The price of Pepsi decreased… then its quantity
demanded has increased Problem. SPRING WATER