No. 5. Assume that there is new market where buyers and sellers have imperfect information and do not have a clear picture of the true supply and demand curves. (In reality the equilibrium price is $10 with 100 units being the equilibrium quantity traded.) Suppose that the first supplier to post a price states their selling price at $20 and other sellers follow that price. Work through what will happen initially. First, would there be any transactions at all since the posted price is not the equilibrium price? What process will unfold thereafter and where (and how) the process will end? How long will the price stay at $10?

No. 5. Assume that there is new market where buyers and sellers have imperfect information and do not have a clear picture of the true supply and demand curves. (In reality the equilibrium price is $10 with 100 units being the equilibrium quantity traded.) Suppose that the first supplier to post a price states their selling price at $20 and other sellers follow that price. Work through what will happen initially. First, would there be any transactions at all since the posted price is not the equilibrium price? What process will unfold thereafter and where (and how) the process will end? How long will the price stay at $10?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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