Suppose the price of butter falls because milk price supports are removed. Will people's tastes shift away from margarine and toward butter?
No. This change in relative prices will result in a change in consumption but will not affect preferences. The indifference map, which measures tastes, does not change when prices of goods change.
You might also like to view...
What is true about threats in the game in Scenario 13.15?
A) Simple can change the equilibrium by means of a credible threat; Boring cannot. B) Boring can change the equilibrium by means of a credible threat; Simple cannot. C) Boring can change the equilibrium by means of a credible threat only if it can move before Simple. D) Simple can change the equilibrium by means of a credible threat only if it can move before Boring. E) Neither firm has a credible threat with which to change this equilibrium.
The forces of supply and demand assure that
a. demand curves and supply curves tend to shift to the right as time goes by. b. the price of a good will eventually rise in response to an excess demand for that good. c. when the supply curve for a good shifts, the demand curve for that good shifts in response. d. the equilibrium price of a good will be rising more often than it will be falling.
Assume Qs represents the quantity supplied at a given price and Qd represents the quantity demanded at the same given price. Which of the following market conditions produce a downward movement of the price?
A. Qs = 1,000, Qd = 750. B. Qs = 750, Qd = 750. C. Qs = 750, Qd = 1,000. D. Qs = 1,000, Qd = 1,000.
Historically, some governments have relied on the revenue generated from printing currency to finance government spending. Give two examples of government's relying on paper currency to finance wartime expenditures. What do you expect happened to inflation rates during these historical episodes?
What will be an ideal response?