The rash of hurricanes that pelted the Gulf Coast in 2005 resulted in a large decline in gasoline production as many offshore rigs were shut down and many refineries were taken off line while waiting out the hurricane
The decrease in supplies of gasoline led to a run up in prices. Many voters clamored for relief by calling on their congressman and senators to enact temporary price controls. Analyze the impact on the gasoline market that would have transpired had politicians actually headed the calls by voters to impose price controls on gasoline.
If temporary controls had been put into effect the likely impact on the market would have been to create a shortage of gasoline. Put simply, this would have resulted in long lines at gas stations and other means of rationing gas as customers attempt to look for ways around the price control.
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In the classical theory of aggregate demand, a decrease in the velocity of money leads to
a. a downward shift in the aggregate demand curve, a fall in prices, and no change in output. b. an increase in the aggregate demand curve, a rise in prices, and no change in output. c. no change in aggregate demand or supply because higher velocity increases the money supply. d. an upward shift in the aggregate demand curve, a fall in prices, and no change in output.
The consumption function assumes that:
a. only disposable income affects consumption b. only the price level affects consumption. c. many factors other than disposable income affect consumption, and each is allowed to vary along the consumption function. d. factors other than disposable income affect consumption, but those are held constant along the consumption function. e. only consumer expectations affect consumption.
Suppose people value clean air more as their incomes increase. What would happen to the optimal amount of clean air as a country develops economically? Is there an economic prediction we can make from this?
What will be an ideal response?
Charlie is willing to pay $10 for a T-shirt that is priced at $9. If Charlie buys the T-shirt, then his consumer surplus is
A. $19. B. $0.90. C. $90. D. $1.