List all the influences on buying plans that change demand, and for each influence, say whether it increases or decreases demand
What will be an ideal response?
Influences that change the demand for a good include:
• The prices of related goods. A rise (fall) in the price of a substitute increases (decreases) the demand for the first good. A rise (fall) in the price of a complement decreases (increases) the demand for the first good.
• The expected future price of the good. A rise (fall) in the expected future price of a good increases (decreases) the demand in the current period.
• Income. An increase (decrease) in income increases (decreases) the demand for a normal good. An increase in income decreases (increases) the demand for an inferior good.
• Expected future income and credit. An increase (decrease) in expected future income or credit increases (decreases) the demand.
• The population. An increase (decrease) in population increases (decreases) the demand.
• People's preferences. If people's preferences for a good rise (fall), the demand increases (decreases).
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The above figure shows the market for pizza. The market is in equilibrium when people learn that eating pizza helps prevent heart disease. What point represents the most likely new price and quantity?
A) A B) B C) C D) D E) E
Suppose the United States can produce either 15,000,000 cars or 20,000,000 bottles of wine in a year and France can produce 10,000,000 cars or 18,000,000 bottles of wine in a year. This implies that:
a. the United States has a comparative advantage in the production of wine. b. France has a comparative advantage in the production of cars c. the United States has an absolute advantage in the production of cars. d. France has an absolute advantage in the production of wine.
If a monopolist were to produce in the inelastic segment of its demand curve:
A. total revenue would be at a maximum. B. marginal revenue would be positive. C. the firm would not be maximizing profits. D. it would necessarily incur a loss.
When the coupon rate on newly issued bonds ________ relative to older, outstanding bonds, the market price of the older bond ________
A) increases; falls in the secondary market B) increases; rises in the secondary market C) decreases; falls in the secondary market D) decreases; falls in the primary market