A student was asked to draw a demand and supply graph to illustrate the effect on the market for premium bottled waterof a fall in the price of electrolytes used in some brands of premium bottled water, holding everything else constant.She drew the graph to the right and explained it as follows:"Electrolytes are an input to some brands of premium bottled water, so a fall in the price of electrolytes will cause thesupply curve for premium bottled water to shift to the right (from S, to S₂). Because this shift in the supply curve resultsin a lower price (P₂), consumers will want to buy more premium bottled water and the demand curve will shift to theright (from D, to D₂)We know that more premium bottled water will be sold, but we can't be sure whether the price of premium bottled waterwill rise or fall. That depends on whether the supply curve or the demand curve has shifted farther to the right. I assumethat the effect on supply is greater than the effect on demand, so I show the final equilibrium price (Ps) as being lowerthan the initial equilibrium price (P₁)."Where is the flaw in the student's argument?O Supply will shift inwardO Demand will not shiftDemand will shift inwardwould100S₁(1)√292Quantity (per week)$₂DD₂120

Where is the flaw in the student's argument?a. Supply will shift inward.b. Demand will not shift.c.…

A student was asked to draw a demand and supply graph to Bustrate the effect on the market for premium bottled water of a fail in the price of electrolytes used in some brands of premium bottled water, holding everything else constant. She drew the graph to the right and explained it as follows: Electrolytes are an input to some brands of premium bottled water, so a fail in the price of electrolytes will cause the supply curve for premium bottled water to shift to the right (from S, to S₂) cause this shift in the supply curve results in a lower price (P₂), consumers will want to buy more premium bottled w and the demand curve will shift to the right (from D, to D₂ We know that more premium bottled water will be sold, but we can be sure whether the price of premium bottled water will rise or fall. That depends on whether the supply curve or demand curve has shifted farther to the right I assume that the effect on supply is greater than the effect on demand, so I show the final equilibrium price (Ps) as being lower than the initial equilibrium price (P₁) Where is the flaw in the student's argument O Supply will shift inward O Demand will not shit O Demand will shift inward (1) Quantity (per week)

A student was asked to draw a demand and supply graph to Bustrate the effect on the market for premium bottled water of a fail in the price of electrolytes used in some brands of premium bottled water, holding everything else constant. She drew the graph to the right and explained it as follows: Electrolytes are an input to some brands of premium bottled water, so a fail in the price of electrolytes will cause the supply curve for premium bottled water to shift to the right (from S, to S₂) cause this shift in the supply curve results in a lower price (P₂), consumers will want to buy more premium bottled w and the demand curve will shift to the right (from D, to D₂ We know that more premium bottled water will be sold, but we can be sure whether the price of premium bottled water will rise or fall. That depends on whether the supply curve or demand curve has shifted farther to the right I assume that the effect on supply is greater than the effect on demand, so I show the final equilibrium price (Ps) as being lower than the initial equilibrium price (P₁) Where is the flaw in the student's argument O Supply will shift inward O Demand will not shit O Demand will shift inward (1) Quantity (per week)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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