Can the process of consumer choice as illustrated with a budget line/indifference curves approach explain the downward sloping demand curves that consumers have for goods, such as Pepsi?
What will be an ideal response?
Yes. Measure the quantity of Pepsi consumed on the horizontal axis of the budget line/indifference curve diagram. Holding income and other prices constant, a series of decreases in the price of a Pepsi rotates the budget line outward. As the consumer then moves to successively higher indifference curves, the quantity of Pepsis consumed will increase successively, thereby demonstrating that lower prices increase the quantity demanded.
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In the model where it is assumed that the state of technology does not change, what parameters and/or variables cause changes in steady state output per worker?
A) savings rate B) depreciation rate C) human capital per worker D) all of above E) none of above
Answer the following statements true (T) or false (F)
1) An increase in imports (independent of a change in the U.S. price level) will increase both U.S. aggregate supply and U.S. aggregate demand. 2) An increase in business excise taxes will shift the aggregate supply curve leftward. 3) A decrease in per-unit production costs will shift the aggregate supply curve leftward. 4) The aggregate supply curve (short run) becomes steeper as the economy moves rightward and upward along it. 5) Cost-push inflation is depicted as a rightward shift of the aggregate demand curve along an upsloping aggregate supply curve.