Explain how various components work together in the decision-making process of the free market system.
What will be an ideal response?
The decision-making process is made up of millions of buyers and sellers. They each indicate what they want through their actions and inactions in the marketplace, which as a whole determines how resources are allocated. Buyers and sellers use price to communicate to each other. Price reveals information about the relative availability of products to buyers. In addition, price provides sellers with information about the relative value that consumers place on products. In this way, price provides a way for buyers and sellers to convey their views about the relative value of resources. This communication causes resources to shift from uses that are less valued to those that are more valued.
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The income per capita of Ruberia in a certain year was 7,240 rubies and the income per capita of U.S. during the same year was $48,000. A bundle of goods that costs 100 rubies in Ruberia has a price of $1,250 in the U.S
Which country has a higher income per capita using PPP?
The figure illustrates the market for chairs. If the supply of chairs increases, the price of a chair ________ $40 and the quantity ________
A) will rise above; demanded will decrease B) will rise above; supplied will increase C) will fall below; demanded will increase D) will fall below; demanded will decrease
Suppose that the value of the short-run absolute elasticity of demand for a good is 0.3. Then, we know the long-run absolute price elasticity of demand will be
A) 0. B) greater than 0.3. C) elastic. D) less than 0.3.
Assume that Spain will either specialize in producing cars or TVs. What is their opportunity cost of producing 8 TVs?
