How does price serve as a signal to resource owners?
What will be an ideal response?
When consumers decide that a good or service is more appealing than before, demand rises. This creates a shortage at the original equilibrium price, putting upward pressure on price. The higher price increases the amount of profit firms can earn, and provides them with an incentive to produce more. Thus, resource prices are bid up to attract more resources to the firms. The end result is a movement of resources into the industry.
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In the aggregate demand and aggregate supply model,
a. the factors that cause the demand curves in both models to slope downward are the same. b. the factors that cause the supply curves in both models to slope upward are the same. c. the upward-sloping aggregate demand curve intersects the downward-sloping aggregate supply curve to determine the economy's price level and GDP. d. the upward-sloping aggregate supply curve intersects the downward-sloping aggregate demand curve to determine the economy's price level and GDP. e. the price level never changes even with shifts in aggregate demand and aggregate supply.
When can a monopolist practice price discrimination?
If Boliva's terms of trade changes from 1.00 to 1.20, it implies that
a. Bolivia is exporting more than it's importing b. Bolivia is importing more than it's exporting c. Bolivia's export prices have risen relative to its import prices d. Bolivia has lost the comparative advantage in the production of goods e. Bolivia now has an absolute advantage in the production of goods
The change in the quantity of aggregate output demanded depends on how much the aggregate expenditure line shifts, not on which spending component causes the shift
Indicate whether the statement is true or false