Economics For Today
10th Edition
ISBN: 9781337670654
Author: Tucker
Publisher: Cengage
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Question
Chapter P2, Problem 1KC
To determine
The reason behind the rightward shift in the
Expert Solution & Answer
Answer to Problem 1KC
Option 'b' is correct.
Explanation of Solution
The market is the place where the buyers and sellers interact with each other and the exchange of goods and services takes place between the two at a mutually agreed
Option (b):
When the price of the auto insurance falls, it leads to an increase in the demand for the autos. This is because the auto insurance is mandatory for taking the auto and when the insurance price decreases, it increases the real money balance and causes a rightward shift in the demand curve. This means option 'b' is correct.
Option (a):
When everything else remains the same, an increase in the price of a commodity will lead to a decrease in the demand for the same. Thus, when the price falls here, the demand will increase but will lead to a movement along the same demand curve and not a shift. It means that option 'a' is incorrect.
Option (c):
The fall in the consumer income decreases the real income of the consumer and as a result, the demand curve will shift inward, and it will be depicted by a leftward shift in the demand curve. This indicates that option 'c' is also incorrect.
Option (d):
The fall in the price of steel would decrease the production cost of autos. When the cost of production decreases, the price will decrease making an increase in demand that leads to a movement along the same demand curve. Since the change in the price of steel causes a movement along the same curve and not a shift, option 'd' is incorrect.
Economics Concept Introduction
Market: The market is the place where the buyers and sellers interact with each other and the exchange of goods and services takes place between the two at a mutually agreed price level. The demand is done by the consumers, whereas the supply is done by sellers.
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Responsd to Luis Rodriguez
1800 tons of pomegranates a year is a lot of sweetness!
So, you can get 71 Afghanis for $1? How cool. Does that mean you can buy a lot of stuff in Afghanistan for only $1? How do you know that your purchasing power in Afghanistan is stronger than in the United States?
Yes, with an exchange rate of 71 Afghan Afghani for 1 US dollar, you can buy many things in Afghanistan for just $1. However, purchasing power isn't solely determined by the exchange rate. It also depends on the cost of goods and services in each country. For example, if a meal in Afghanistan costs 200 Afghanis, you would need about $2.82 to buy that meal in US dollars (since 200 Afghanis divided by 71 Afghanis per dollar equals approximately $2.82). So, while the exchange rate allows you to get more Afghanis for your dollars, you also need to consider how much things cost in Afghanistan.
Now that the world seems to like Afghani stuff and is buying more of it, does that mean your…
The idea that a country can experience gains from trade means that it can
A) consume at a point outside its production possibilities frontier.
B) increase its exports.
C) increase the efficiency of its production.
D) experience a bowed-out production possibilities frontier.
A country is likely to have a comparative advantage in a land-intensive activity if it has a
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B) large population relative to its landmass.
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