2. Evaluate the following statement: “When DVD- players initially became available, their price was $750 and their availability was limited. Now a DVD-player can be purchased for $100 and there has been an increase in availability. This violates the Law of Supply."

2. Evaluate the following statement: “When DVD- players initially became available, their price was $750 and their availability was limited. Now a DVD-player can be purchased for $100 and there has been an increase in availability. This violates the Law of Supply."

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter5: Elastic And Its Application

Section: Chapter Questions

Problem 8QR

See similar textbooks

Similar questions

Explain why the following statement is false: In the goods market, no seller would be willing to sell for less than the equilibrium price.
What is the difference between the demand and the quantity demanded of a product, say milk? Explain in words and show the difference on a graph with a demand curve for milk.
When someones kidneys fail, the person needs to have medical treatment with a dialysis machine (unless or until they receive a kidney transplant) or they will die. Sketch a supply and demand diagram, paying attention to the appropriate elasticities, to illustrate that the supply of such dialysis machines will primarily determine the pure.
What does a downward-sloping demand curve mean about how buyers in a market will react to a higher price?
According to the previous discussion, what factors influence the price elasticity of demand for cigarettes? What other factors not mentioned in the article might influence the price elasticity of demand for cigarettes?
Would you expect supply to play a more significant role in determining the price of a basic necessity like food or a luxury like perfume? Explain. Hint: Think about how the price elasticity of demand will differ between necessities and luxuries.
Suppose you could buy shoes one at a time, miter than in pain. What do you predict the cross-price elasticity for left shoes and right shoes would be?
What is the price elasticity of supply? Can you explain it in your own words?
Review Figure 3.4. Suppose the price of gasoline is 1.60 per gallon. Is the quantity demanded higher or lower than at the equilibrium price of 1.40 per gallon? What about the quantity supplied? Is there a shortage or a surplus in the market? If so, how much? Figure 3.4 Demand and Supply of Gasoline
The Stopdecay Company sells an electric toothbrush for $25. Its sales have averaged 8,000 units per month over the past year. Recently, its closest competitor, Decayfigh ter, reduced the price of its electric toothbrush from $35 to $30. As a result, Stopde cays sales declined by 1,500 units per month. What is the arc cross elasticity of demand between Stopdecays toothbrush and Decayfighters toothbrush? What does this indicate about the relationship between the two products? If Stopdecay knows that the arc price elasticity of demand for its toothbrush is 1.5, what price would Stopdecay have to charge to sell the same number of units as it did before the Decayfighter price cut? Assume that Decayfighter holds the price of its toothbrush constant at $30. What is Stopdecays average monthly total revenue from the sale of electric toothbrushes before and after the price change determined in part (b)? Is the result in part (c) necessarily desirable? What other factors would have to be taken into consideration?
Economists define normal goods as having a positive income elasticity. We can divide normal goods into two types: Those whose income elasticity is less than one and those whose income elasticity is greater than one. Think about products that would fall into each category. Can you come up with a name for each category?
What is the price elasticity of demand? Can you explain it in your own words?