Elly needs to get her leaking faucet repaired as soon as possible. She gets in touch with a plumber who asks for an unreasonably high fee. If no other plumber is available for work, who has a higher bargaining power? Explain your answer
What will be an ideal response?
Bargaining power describes the relative power an individual has in negotiations with another individual. Two principles—the cost of failing to come to an agreement and the influence of one partner on the other—are generally used to describe the bargaining power of each partner engaged in bargaining. If the influence of one agent over the other agent increases, then the former's bargaining power increases, but if the cost of not coming to an agreement increases, then his bargaining power goes down. In this case, the cost of failing to come to an agreement is high for Elly because no other plumber is available for work. Therefore, the plumber has a higher bargaining power.
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There is a technological advance in the production of a good and simultaneously also an increase in the expected future price. Which of the following will happen?
A) The equilibrium price will rise because the supply curve shifts rightward. B) The equilibrium price falls because the supply curve shifts leftward. C) The technological improvement shifts the supply curve rightward while the increase in the expected future price shifts the supply curve leftward. The net effect is not known. D) The demand curve shifts rightward and the supply curve does not shift.
Everything else held constant, an increase in financial frictions ________ aggregate ________
A) increases; demand B) decreases; demand C) decreases; supply D) increases; supply