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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406

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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406
Textbook Problem

In the figure that follows, can the movement from point 1 to point 2 be explained by a combination of an increase in the price of a substitute and a decrease in the price of nonlabor resources? Explain your answer.

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To determine

Explain the movement of point 1 to 2 in the results of increase in price of substitute goods and decrease the price of non-labor resources.

Explanation

Figure 1 shows the shifts in demand and supply curves.

In Figure 1, the vertical axis measures the price and horizontal axis measures the quantity demanded. The upward sloping curves are the supply curves and the downward sloping curves are the demand curves. Initially, the equilibrium point is 1 (intersecting point of D1 and S1)...

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