1.Suppose the income of buyers in a market for an inferior good decreases and a
ID: 1135419 • Letter: 1
Question
1.Suppose the income of buyers in a market for an inferior good decreases and a technological advancement occurs also. What would we expect to happen in the market?
A.Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.
B.Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
C.Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.
D.None of the above is correct.
2.Saddle shoes are not popular right now, so very few are being produced. If saddle shoes become popular, then how will this affect the market for saddle shoes?
A.The supply curve for saddle shoes will shift right, which will create a shortage at the current price. Price will increase, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity.
B.The supply curve for saddle shoes will shift right, which will create a surplus at the current price. Price will decrease, which will increase quantity demanded and decrease quantity supplied. The new market equilibrium will be at a lower price and higher quantity.
C.The demand curve for saddle shoes will shift right, which will create a surplus at the current price. Price will decrease, which will increase quantity demanded and decrease quantity supplied. The new market equilibrium will be at a lower price and higher quantity.
D.The demand curve for saddle shoes will shift right, which will create a shortage at the current price. Price will increase, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity.
A.Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.
B.Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
C.Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.
D.None of the above is correct.
2.Saddle shoes are not popular right now, so very few are being produced. If saddle shoes become popular, then how will this affect the market for saddle shoes?
A.The supply curve for saddle shoes will shift right, which will create a shortage at the current price. Price will increase, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity.
B.The supply curve for saddle shoes will shift right, which will create a surplus at the current price. Price will decrease, which will increase quantity demanded and decrease quantity supplied. The new market equilibrium will be at a lower price and higher quantity.
C.The demand curve for saddle shoes will shift right, which will create a surplus at the current price. Price will decrease, which will increase quantity demanded and decrease quantity supplied. The new market equilibrium will be at a lower price and higher quantity.
D.The demand curve for saddle shoes will shift right, which will create a shortage at the current price. Price will increase, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity.
Explanation / Answer
Answer:- (1) Suppose the income of buyers in a market for an inferior good decreases and a technological advancement occurs also, then equilibrium quantity would increase due to the fact that the demand for inferior good rises as income decreases, but the impact on equilibrium price would be
ambiguous. Option (b) is correct.
Answer:- (2) If saddle shoes become popular, then the demand curve for saddle shoes will shift right, which will create a shortage at the current price. That will increase price, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity.
Option (D) is correct.
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