Consider the following supply-and-demand diagrams depicting the markets for X and Y, respectively. In the market for good X, supply is perfectly elastic, indicating that producers are prepared to supply any amount of X at price po. So , S1 So P1 .. ......... D1 Do Quantity of X Do Quantity of Y a. In the market for X, demand increases from D, to D4. As a result, the total value that consumers place on X increases b. The increase in demand for X does not change marginal value that consumers place on X. c. In the market for Y, a technological improvement causes supply to increase from So to S1, causing price to fall from po to p,. The total value that consumers place on a given quantity of Y consumed Price of X Price of Y
Consider the following supply-and-demand diagrams depicting the markets for X and Y, respectively. In the market for good X, supply is perfectly elastic, indicating that producers are prepared to supply any amount of X at price po. So , S1 So P1 .. ......... D1 Do Quantity of X Do Quantity of Y a. In the market for X, demand increases from D, to D4. As a result, the total value that consumers place on X increases b. The increase in demand for X does not change marginal value that consumers place on X. c. In the market for Y, a technological improvement causes supply to increase from So to S1, causing price to fall from po to p,. The total value that consumers place on a given quantity of Y consumed Price of X Price of Y
Chapter5: Markets In Motion And Price Controls
Section: Chapter Questions
Problem 10P
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Transcribed Image Text:Consider the following supply-and-demand diagrams depicting the markets for X and Y, respectively. In the market for good X, supply is perfectly elastic, indicating that
producers are prepared to supply any amount of X at price po-
So
Po
So
P1
D1
Do
Quantity of Y
Do
Quantity of X
a. In the market for X, demand increases from Do to D,. As a result, the total value that consumers place on X increases
b. The increase in demand for X does not change marginal value that consumers place on X.
c. In the market for Y, a technological improvement causes supply to increase from So to S4, causing price to fall from p, to p,. The total value that consumers place on
a given quantity of Y consumed
Price of X
Price of Y
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