Any two of these events in questions 1 and 2 occur together? (Draw the diagrams!)
What will be an ideal response?
There are six combinations:
(1) If the price of a PC falls and the price of an MP3 download rises, demand decreases, supply is unchanged, so the price falls and the quantity decreases.
(2) If the price of a PC falls and more firms produce MP3 players, demand decreases and supply increases so the price falls and the quantity might increase, decrease, or not change.
(3) If the price of PC falls and the wages paid electronic workers rise, demand decreases and supply decreases so the quantity decreases and the price might rise, fall, or not change.
(4) If the price of an MP3 download rises and more firms produce MP3 players, demand decreases and supply increases so the price falls and quantity might increase or decrease or remain the same.
(5) If the price of an MP3 download falls and the wages paid electronic workers rise, demand decreases and supply decreases so the quantity decreases and the price might rise or fall or remain the same.
(6) If more firms produce MP3 players and the wages paid electronics workers rise, supply might increase or decrease or remain unchanged, demand is unchanged, so the outcome cannot be predicted.
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According to Gordon, all of the following are important ingredients in the recent U.S. housing bubble EXCEPT
A) low interest rates. B) saving glut. C) financial innovation. D) trade deficit.
In the example of Ireland described in the text, the country's production set shifted outward over time because:
a. of technological advancements which improved its potato cultivation and overall agricultural production. b. it gained new resources over time which enabled it to specialize and gain comparative advantage in software trade with the U.S. and Europe. c. of new resources which allowed it to gain absolute advantage over many of its trading partners. d. of reduction in trade barriers with the European Union.