Readers ask: When Anne’s Antiques Put Their Inventory On Sale?

When the price of a good rises we can expect that?

When the price of a good rises, we can expect that: less of the good will be purchased. The law of demand says that lower prices lead to a higher quantity demanded.

At what price are the gains from trade the sum of consumer and producer surplus maximized?

The market is efficient and both consumer and producer surplus are maximized at the equilibrium point of $5. If the government establishes a price ceiling, a shortage results, which also causes the producer surplus to shrink, and results in inefficiency called deadweight loss.

When a fall in the price of one good reduces the demand for another good two called?

In general, if a reduction in the price of one good increases the demand for another, the two goods are called complements. If a reduction in the price of one good reduces the demand for another, the two goods are called substitutes.

Which of the following is a normal good?

A normal good is a good that experiences an increase in its demand due to a rise in consumers’ income. Normal goods has a positive correlation between income and demand. Examples of normal goods include food staples, clothing, and household appliances.

What is a good example of supply and demand?

There is a drought and very few strawberries are available. More people want strawberries than there are berries available. The price of strawberries increases dramatically. A huge wave of new, unskilled workers come to a city and all of the workers are willing to take jobs at low wages.

What happens to equilibrium when price increases?

The equilibrium price is the price at which the quantity demanded equals the quantity supplied. An increase in supply, all other things unchanged, will cause the equilibrium price to fall; quantity demanded will increase. A decrease in supply will cause the equilibrium price to rise; quantity demanded will decrease.

At what price are the gains from trade maximized?

The sum of consumer and producer surplus (the gains from trade ) is maximized at the equilibrium price and quantity, and no other price /quantity combination maximizes consumer plus producer surplus.

How do you maximize consumer surplus?

Consumer surplus is maximized in a competitive market where the sellers are earning just enough to earn a normal profit. This not only maximizes the consumer surplus of the market, but also ensures the continued production of the good.

Does a free market maximize gains from trade?

Only at the equilibrium quantity are there no wasted resources. A free market maximizes the gains from trade. A free market maximizes producer plus consumer surplus. 3) Between buyers and sellers, there are no unexploited gains from trade and no wasteful trades.

What is the cross price elasticity between Coke and Pepsi?

In fact, the cross – price elasticity of demand for Coca- Cola ® and Pepsi ® has been estimated to be about + 0.7. 6 This means that a 1% increase in the price of one leads to a 0.7% increase in demand for the other; or a 10% increase in the price of one leads to a 7% increase in the demand for the other.

What does a cross price elasticity of 0 mean?

For independent goods, the cross – price elasticity of demand is zero: the change in the price of one good with not be reflected in the quantity demanded of the other. Independent: Two goods that are independent have a zero cross elasticity of demand: as the price of good Y rises, the demand for good X stays constant.

Do buyers determine both demand and supply?

Buyers determine both demand and supply. Buyers determine demand, and sellers determine supply. For a market for a good or service to exist, there must be a. A.

How do you tell if a good is inferior or normal?

If the quantity demanded of a product increases with increase in consumer income, the product is a normal good and if the quantity demanded decreases with increase in income, it is an inferior good. A normal good has positive and an inferior good has negative elasticity of demand.

Are cigarettes a normal or inferior good?

Smoking, as a habit, seems to be an inferior good —the higher your income, the less of it you do. But this is really remarkable. A pack of cigarettes costs perhaps $5 on average (though this varies widely based on local tax rates). And smokers probably smoke about a pack a day on average.

Can a Good be both inferior and normal?

No, it is not possible for a good to be both normal and inferior. These are two categories that are opposites of one another so it is completely impossible to be both at once.