"The price of digital cameras fell because of improvements in production technology. As a result, the demand for non-digital cameras decreased
This caused the price of non-digital cameras to fall; as the price of non-digital cameras fell the demand for non-digital cameras decreased even further." Evaluate this statement.
A) The statement is false because digital camera producers would not reduce their prices as a result of improvements in technology; doing so would reduce their profits.
B) The statement is false because the demand for non-digital cameras would increase as the price of digital cameras fell.
C) The statement is false. A decrease in the price of digital cameras would decrease the demand for non-digital cameras, but a decrease in the price of non-digital cameras would not cause the demand for non-digital cameras to decrease.
D) The statement is false because it confuses the law of demand with the law of supply.
C
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The above figure shows the demand curves in four different markets. If each of the markets has an identical upward sloping supply curve and the same tax is levied on suppliers, which market would produce the largest amount of deadweight loss?
A) A B) B C) C D) D E) C and D
Sally is an average shopper, with average income. When she is in the store she buys a few items which cost more than $20, several items which cost between $5 and $20, and many items which cost less than $1 . The price elasticity of Sally's demand for these goods most likely ____
a. increases as the price decreases b. decreases as the price decreases c. increases as the price increases d. decreases as the price increases e. remains constant over all price ranges