This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: Suppose the U.S. economy enters a recession and incomes fall. What will happen to the equilibrium ... (Read 36 times)

swpotter12

  • Hero Member
  • *****
  • Posts: 527
on: Jun 29, 2018
Suppose the U.S. economy enters a recession and incomes fall. What will happen to the equilibrium prices and quantities of normal goods? Would your answer be the same if you were discussing inferior goods? Why or why not?
 
  What will be an ideal response?

Question 2

If marginal costs for a firm are constant would the average total cost curve still have be u-shaped? Explain.
 
  What will be an ideal response?


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

meltdown117

  • Sr. Member
  • ****
  • Posts: 326
Reply #1 on: Jun 29, 2018
Answer to Question 1

If incomes fall, the demand for normal goods will fall as well. This means that the demand curve will shift to the left, lowering both the equilibrium price and equilibrium quantity. The answer would be opposite if we were discussing inferior goods. A decrease in income raises the demand for inferior goods, leading to a higher equilibrium price and quantity.

Answer to Question 2

If marginal costs are constant then the average total cost curve will be downward sloping. The only way that the average total cost curve could be u-shaped is if marginal cost eventually rises.


swpotter12

  • Hero Member
  • *****
  • Posts: 527
Reply #2 on: Jun 29, 2018
Correct answers!


meltdown117

  • Sr. Member
  • ****
  • Posts: 326
Reply #3 on: Jun 29, 2018
Great! Please up vote :D


« previous next »
 

Did you know?

Once thought to have neurofibromatosis, Joseph Merrick (also known as "the elephant man") is now, in retrospect, thought by clinical experts to have had Proteus syndrome. This endocrine disease causes continued and abnormal growth of the bones, muscles, skin, and so on and can become completely debilitating with severe deformities occurring anywhere on the body.

Did you know?

Glaucoma is a leading cause of blindness. As of yet, there is no cure. Everyone is at risk, and there may be no warning signs. It is six to eight times more common in African Americans than in whites. The best and most effective way to detect glaucoma is to receive a dilated eye examination.

Did you know?

In most cases, kidneys can recover from almost complete loss of function, such as in acute kidney (renal) failure.

Did you know?

Persons who overdose with cardiac glycosides have a better chance of overall survival if they can survive the first 24 hours after the overdose.

Did you know?

Many supplement containers do not even contain what their labels say. There are many documented reports of products containing much less, or more, that what is listed on their labels. They may also contain undisclosed prescription drugs and even contaminants.

In 2008, the U.S. economy suffered a gaping wound as several trillion dollars were ripped out of it. In 2008, the U.S. economy suffered a gaping wound as several trillion dollars were ripped out of it.
Fall Velocity of Water Drops Fall Velocity of Water Drops
Migration and Global Economy Migration and Global Economy
The Rise and Fall of Separation Anxiety The Rise and Fall of Separation Anxiety
What is the value of the equilibrium constant, K, at 25°C for the reaction? What is the value of the equilibrium constant, K, at 25°C for the reaction?
An 80-g aluminum calorimeter contains 380 g of water at an equilibrium temperature of A piece ... An 80-g aluminum calorimeter contains 380 g of water at an equilibrium temperature of A piece ...
Video: Acid-base imbalances - compensation of metabolic acidosis and alkalosis

For a complete list of videos, visit our video library