Each ounce of salt is chemically identical to every other ounce. Why then, does the Morton brand salt sell at your supermarket for a higher price than the store brand?
Morton's advertising creates a perceived product differentiation. As long as you believe there's a difference
between Morton and any other salt, that's enough! Its demand curve becomes more inelastic and it may pay
Morton to raise the price because it will not lose significant market share.
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The price elasticity of demand is a measure of the extent to which the quantity demanded of a good changes when ________ and all other influences on buyers' plans remain the same
A) income changes B) the price of a related good changes C) the price of the good changes D) the demand alone changes E) both the demand and the supply simultaneously change
Why are consumers in a competitive market considered to be price takers?
What will be an ideal response?
If, when a firm doubles all its inputs, its average cost of production increases, then production displays
A) economies of scale. B) diminishing returns. C) diseconomies of scale. D) declining fixed costs.
Consider a competitive market in which people consume at the point where their marginal rates of substitution between products X and Y are 3/5
In this same market, producers produce where their marginal rates of transformation between X and Y are also 3/5. However, producers are producing 7 of Y and 3 of X, and consumers wish to consume 5 of Y and 5 of X per unit of time. Explain how this situation can exist. Also determine if it represents an equilibrium or not. If not an equilibrium, what will tend to happen in the market?