1. If the position of the demand curve for digital rock music albums unchanged,
ID: 1092185 • Letter: 1
Question
1. If the position of the demand curve for digital rock music albums unchanged, what can account for a continuing rise in the market clearing price?
2. If your answer to Question 1 explains why album prices have been rising, what can you predict is likely to happen to revenues from albums in the near future?
3. How could the receipt of new information about health implications of foods, alcohol, and tobacco affect a consumer optimum.
4. Other things being equal, would a consumer optimum change if the prices of all items consumed rise at an identical rate? Explain.
5. why do you suppose that a brand-new firm rarely begins as a publicity held corporation?
6. How might tougher regulations and higher tax rates dissuade establishment of new business proprietorships and partnerships?
Explanation / Answer
1. A decrease in supply (movement of supply curve to left) as a result of such things like increase in costs of producing albums.
2. Revenues will probably go down as you are likely in the elastic portion of the demand curve.
3. If it is adverse, it would cause the demand curve to shift to the left, reducing price and quantity.
4. Yes, because although there would be no substitiution effect there would be an income effect, people would consume less because their money would not go as far.
5. Most investors are somewhat risk averse, so they would be unwilling to buy shares until the company has estlished a track record of success.
6. They increase risk and costs, making the potential profit much more questionable.
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