PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Chapter 3, Problem 2RQ
To determine
Cost producing good and its market price.
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Some have argued that higher cigarette prices do not deter smoking. While there are many arguments both for and against this view, some find the following argument to be the most persuasive of all: “The laws of supply and demand indicate that higher prices are ineffective in reducing smoking. In particular, higher cigarette prices will reduce the demand for cigarettes. This reduction in demand will push the equilibrium price back down to its original level. Since the equilibrium price will remain unchanged, smokers will consume the same number of cigarettes.”
Do you agree or disagree with this view?
If the demand function for a commodity is given by the equation
p2 + 4q = 1200
and the supply function is given by the equation
700 − p2 + 10q = 0,
find the equilibrium quantity and equilibrium price. (Round your answers to two decimal places.)
The market for organic and locally sourced foods has skyrocketed over the past decade as consumers focus on improving their eating habits. However, severe droughts have caused organic food prices to rise significantly, forcing many consumers to shop at conventional supermarkets (which are increasingly adding organic food options) instead of organic food markets such as Whole Foods. In response, companies such as Whole Foods have begun offering more nonorganic options on their store shelves in order to provide their consumers with more affordable options. Based on this response, what did companies such as Whole Foods realize about the elasticity of demand for organic foods that caused them to lower their prices by changing the type of foods they sell?
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PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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