Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 4, Problem 6WNG
To determine
The relative price.
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Often, wages and the prices of services cost more in cities than in rural areas. Is this a deviation from the law of one price?
Goods A and B are substitutes in production. The price of good A rises. As a result,
the equilibrium price of good B and the equilibrium quantity.
A) rises; decreases
B) falls; increases
C) falls; decreases
D) rises; increases
Consider each of the following goods and services. For each, identify whether the law of one price will hold, and state whether the relative price is greater than, less than, or equal to 1. Explain your answer in terms of the assumptions we make when using the law of one price.
a. Wheat traded freely in the United States and Canada.
b. Sugar traded in the United States and Mexico; the U.S. government imposes a quota on sugar imports into the United States.
c. Starbucks grande dark roast coffee sold in the United States and Japan.
d. Haircuts in the United States and the United Kingdom.
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Similar questions
- If the absolute price of good X is $10 and the absolute priceof good Y is $14, then what is (a) the relative price of goodX in terms of good Y and (b) the relative price of good Y interms of good X?arrow_forwardAssume the following events are taking place simultaneously: the prices of gasoline rises, commuting by train becomes more affordable and more comfortable, the price of steel falls, automobile insurance premium increases, and auto-workers' wages decreases. What would happened to the equilibrium price of new cars if new cars are normal goods? Price will fall. a. b. C. d. A B D Price will stay exactly the same. Price will rise. The price change will be ambiguous. a b с darrow_forwardHow a change in the market (including information, preferences, technology, price of alternative goods, regulations, taxes, etc.) has shifted either the supply or demand of a good. How did this change affect the market equilibrium for that good or service?arrow_forward
- In constructing the demand graph to show how the price of a good price affects how much of it the buyers will buy, the convention that economists follow is to measure price on the b. C. d. horizontal axis even though it is the dependent variable. horizontal axis because it is the independent variable. vertical axis even though it is the independent variable. vertical axis because it is the dependent variable.arrow_forwardWhy an equilibrium is defined as a price?arrow_forwardConsider two goods, X and Y. The price of product X increases from R6 to R8 per unit. As aresult, the quantity demanded of product Y decreases from 200 to 190 units. Q: Give at least two real-world examples of goods like X and Y.arrow_forward
- In the graph above, suppose equilibrium is at point D. The price of the good is expected to rise in the future, then equilibrium will A. shift to point A. B. shift to point B. C. shift to point C. D. remain at point D.arrow_forwardhow is the price of Fertilizer determined? we know that the price of a good is formed from the interaction of supply and demand. Producers will not sell a good below the cost of production. Demand changes the price due to competition; more demand drives the price up, less demand brings the price down. when you discuss how the price is determined: Taxes: is the good taxed? (e.g. cigarettes have a high tax) Costs of production: (resources, labor, etc.) Transportation Competition: is the good in high demand? Give a summary of the factors that go into the price of the good.arrow_forwardHow price reaches equilibrium? Give an example.arrow_forward
- When the price of goods X = IDR 10, the quantity demanded is 5. When the price of goods X = IDR 15, the quantity demanded is 7.True/false?arrow_forwardOver the years, the demand for textiles in Country A has grown in spite of rising prices. How would you reconcile this fact with the law of demand?arrow_forwardMost people demand goods and services much less than they want. True or False? Explain your answer. How might the price of wheat affect the supply of rice?arrow_forward
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