Answered: As consumers adjust to the increased…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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As consumers adjust to the increased supply, the demand becomes more elastic. The demand curve pivots from the short run (DSR) to
the long run (DLR).
In the course of the shift to the long run, the quantity continues to increase. The price partly recovers and in the long run settles at
per tile.

Transcribed Image Text:A popular brand of decorative clay floor tile is priced at $7 per square until a surge in supply forces the price, for a short time, down to $3. Drag the appropriate curve(s) to show the effect of the price drop. To refer to the graphing tutorial for this question type, please click here. Price ($) 16 15 S1 14 13 12 11 10 7 7 6 5 4 DLR 3 2 7 DSR Quantity (thousands)

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Perfect competition refers to the situation where there are large number of prouder and consumers are exists in the market. Producers are selling homogenous goods in the market. Individual firms or consumers cannot influence the market supply of demand. Firms and consumers are price takers. The equilibrium price and quantity is determined by the equilibrium between market demand and supply.

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