Why does a price increase of a product result in a decrease in the quantity demanded of that product, according to utility analysis?
What will be an ideal response?
There are two effects associated with a price increase. The first is the substitution effect, which is the tendency of consumers to substitute cheaper goods for the more expensive good. The second effect is the real income effect, which is the lower overall purchasing power of the consumer as a result of the price increase. As a result of the two effects, a price increase results in a smaller quantity demanded.
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What is price discrimination? Can a perfectly competitive firm price discriminate? Explain you answer
What will be an ideal response?
According to classical macroeconomic theory, in the long run
a. monetary growth affects both real and nominal variables. b. the only real variable affected by monetary growth is the unemployment rate. c. a number of factors that affect unemployment are influenced by monetary growth. d. monetary growth affects nominal but not real variables.