Consumers expressed outrage at the high price of chainsaws after Hurricane Andrew hit Florida and Louisiana, with newspaper editorials accusing suppliers of unconscionable price gouging. Use a supply and demand graph to assist in explaining the increase in the price of chain saws after Hurricane Andrew.
What will be an ideal response?
An increase in the number of downed trees led to an increase in the demand for chain saws. When demand increases and supply is unchanged, equilibrium price and quantity increase (Figure 4-24). “Gouging” could be regarded as simply a (much) higher equilibrium price due to an increase in demand.
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In the above figure, what is the total consumer surplus from all the milk bought if the price of milk is $3.00 per gallon?
A) $16 million B) $12 million C) $4 million D) $2 million
According to the quantity theory of money, a 15 percent increase in the quantity of money creates a 15 percent rise in
A) the price level. B) the velocity of circulation. C) real GDP. D) the unemployment rate.
Land in the South can often be used to grow either tobacco or cotton. Suppose the price of tobacco increases. Explain how the market for cotton will be affected
What will be an ideal response?
Which does NOT cause an industry that might otherwise be competitive to tend toward oligopoly?
A) economies of scale B) barriers to entry C) mergers D) strategic independence