B. cell phones. c. popular board games. d. Twitter 6. When the price of audio bo
ID: 1105632 • Letter: B
Question
B. cell phones. c. popular board games. d. Twitter 6. When the price of audio books, a normal good, falls, causing your purchasing power to rise, you buy more of them due to a. the substitution effect. b. the income effect c. the deadweight loss effect. d. the elasticity effect. 7. Lucinda buys a new GPS system for $200. She receives consumer surplus of $75 from the purchase. What value does Lucinda place on her GPS system? a. $75 b. $125 c. $200 d. $275 8. In a city with rent-controlled apartments, all of the following are true except a. apartments usually rent for rates lower than the market rate. b. apartments are often in shorter supply than they would be without rent control. c. landlords have an incentive to rent more apartments than they would without rent control. d. it usually takes more time to find an apartment than it would without rent controlExplanation / Answer
1. In this case, when the price of audio falls, the purchasing power of the consumer increases. The consumers has more money now to purchas goods, so he buys more of them due to income effect.
option b
2. Consumer surplus= Value a consumer places on a good - price of that good
$75=Value a consumer places on a good -$200
value =$275
3. option d
Landlords will not have incentive to rent more apartment because the price of apartments is now below the equilibrium price, so the landlords are not very much willing to rent apartment.
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