Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Chapter 5, Problem 6TY
To determine
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The following graph shows the demand curve for a group of consumers in the U.S. market (blue line) for tablets. The market price of a tablet is shown by the black horizontal line at $120.
Each rectangle you can place on the following graph corresponds to a particular buyer in this market: orange (square symbols) for Paolo, green (triangle symbols) for Sharon, purple (diamond symbols) for Van, tan (dash symbols) for Amy, and blue (circle symbols) for Carlos. Use the rectangles to shade the areas representing consumer surplus for each person who is willing and able to purchase a tablet at a market price of $120. (Note: If a person will not purchase a tablet at the market price, indicate this by leaving his or her rectangle in its original position on the palette.)
Based on the information on the previous graph, you can tell that____will buy tablets at the given market price, and total consumer surplus in this market will be___
Suppose the market price of a tablet decreases…
The following graph shows the demand curve for a group of consumers in the U.S. market (blue line) for tablets. The market price of a tablet is shown by the black horizontal line at $80.
Each rectangle you can place on the following graph corresponds to a particular buyer in this market: orange (square symbols) for Larry, green (triangle symbols) for Megan, purple (diamond symbols) for Raphael, tan (dash symbols) for Susan, and blue (circle symbols) for Alex. Use the rectangles to shade the areas representing consumer surplus for each person who is willing and able to purchase a tablet at a market price of $80. (Note: If a person will not purchase a tablet at the market price, indicate this by leaving his or her rectangle in its original position on the palette.)
Explain why you think that the demand of one product may diminish as prices are increased
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Economics: Principles & Policy
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- You may have observed that items such as different brands of aspirin, tomato sauce, or gasoline are typically priced the same as each other. This is particularly true when consumers can find these goods in close proximity to each other. For example, prices are often the same at gas stations that are on opposite sides of the street. Prices are also generally the same for products next to each other on the same grocery store shelf. Choose the correct fill in the blank. The aforementioned examples are goods that are likely to be substitutes or complements You would expect the value of the cross-price elasticity to be insignificant, small, or large because the opportunity cost of getting information on price is low.arrow_forwardComplementary goods are goods that are closely related. Choose the example below that best describes complementary goods. Sally planned to eat lunch at McDonald's, but it was closed. She decided to go to Wendy's for lunch instead. Tom went to the store to buy groceries. He had cherry soda on his list, but he decided to buy lemon-lime soda instead. The lemon-lime soda was on sale, so it was a better deal. In the spring, the demand for tennis rackets goes up. This causes the potential demand of tennis balls to also go up. December is the most popular month of the year to bake cookies. This causes the demand for butter to go up and the cost of margarine to go down.arrow_forwardTwo students, Nick and Sofia, are discussing normal and inferior goods. Nick says that if Frodo buys more beer when the price of beer goes up, then beer must be an inferior good for Frodo. If, on the other hand, he buys less beer when the price of beer goes up, then beer must be a normal good for Frodo. Sofia disagrees: "Normal and inferior goods are about income changes, not price changes. Therefore, we do not have enough information: beer could be an inferior or normal good in either of these cases." Do you agree or disagree? Carefully explain your point of view. Support your argument with graphs of income, substitution and total effects (please put beer on the horizontal axis and the other goods on the vertical axis). Please assume that Frodo's preferences over beer and other goods are strictly convex and satisfy "more is better" assumption.arrow_forward
- David-Michael is conducting an experiment, charging different prices for the same products at different stores and measuring sales. With this information, he will construct a demand curve. How can David-Michael use this information?arrow_forward#51arrow_forwardTom had an "absolute need" for web help and therefore was ready to "pay anything" to get it. If this were true, what shape would his demand curve have? Why isn't this realistic?arrow_forward
- In workout problem 8.4, Maude thinks delphiniums and hollyhocks are perfect substitutes, one for one. If delphiniums currently cost $3 per unit and hollyhocks cost $4 per unit and if the price of delphiniums rises to $6 per unit, the income effect of the change in demand for delphiniums will be bigger than the substitution effect. there will be no change in the demand for hollyhocks. the entire change in demand for delphiniums will be due to the substitution effect. 1/3 of the change in demand will be due to the income effect. 2/3 of the change in demand will be due to the income effect.arrow_forwardWho introduced utilityarrow_forwardHow does a consumer’s optimal choice of goods change if all prices and the consumer’s income double?arrow_forward
- Identify the flaw in this analysis: "If more Bahamians go on a low-carb diet, the demand for pasta will fall. The decrease in the demand for pasta will cause the price of pasta to fall. The lower price, however, will then increase the demand. In the new equilibrium, Bahamians might end up consuming more pasta than they did initially."arrow_forwardYou love peanut butter. Other spreads are just not as good, as far as you're concerned. You hear on the news that 50 percent of the peanut crop in the South has been wiped out by drought and that this will cause the price of peanuts to double by the end of the year. As a result, your demand for peanut butter Group of answer choices will increase but not until the end of the year. increases today. decreases as you look for a substitute good. shifts left today.arrow_forwardSuppose that you discover that, ceteris paribus, when the price of tomatoes increases, the demand for bleu cheese decreases. From this you conclude that: tomatoes and blue cheese are substitutes. tomatoes are inferior goods and blue cheese is a normal good. tomatoes and blue cheese are complements. the demand curve for tomatoes has shifted to the left.arrow_forward
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