Goods like exclusive designer clothes carry with them prestige value linked to their price. As a result, some people demand more of such goods as the price increases. For those people, such goods are Giffen goods.
Answer the following statement true (T) or false (F)
False
Rationale: These are luxury goods that are composed of both the physical good as well as the prestige value associated with it. When price increases prestige value, the nature of the good changes when price increases -- but the good itself is still a normal good in the sense that, were the prestige value to stay constant, an increase in price leads to less quantity demanded.
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The concept of adverse selection helps to explain all of the following EXCEPT
A) why firms are more likely to obtain funds from banks and other financial intermediaries, rather than from the securities markets. B) why indirect finance is more important than direct finance as a source of business finance. C) why direct finance is more important than indirect finance as a source of business finance. D) why the financial system is so heavily regulated.
The deadweight loss equals the consumer surplus minus the producer surplus resulting from a non-equilibrium price
a. True b. False Indicate whether the statement is true or false
Two studies published in the New England Journal of Medicine link the risk of breast cancer to alcohol consumption. Young women who have nine drinks per week were reportedly 150 percent more likely to develop breast cancer. According to economic analysis, how would this information affect the market for alcohol?
a. Demand will increase, placing upward pressure on price. b. Supply will decrease, placing downward pressure on price. c. Demand will decrease, placing downward pressure on price. d. Supply will increase, placing upward pressure on price.
When wages increase, the income effect ________ the supply of labor and the substitution effect ________ the supply of labor.
A. decreases; increases B. increases; decreases C. increases; increases D. decreases; decreases