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solutions03

# solutions03 - C h a p t e r 3 DEMAND AND SUPPLY Solutions...

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3 DEMAND AND SUPPLY Solutions to the Odd-Numbered Problems 1. a. ½ pound of wool trades for 1 pound of butter trades. b. Butter is 40¢ a pound. c. Yes, many people would accept Mr. Gregg’s offer. People could use \$1.60 to buy 8 pounds of bacon. They could then trade this bacon with Mr. Gregg for 8 yards of cloth. Then they could trade the 8 yards of cloth for 1 bushel of salt. The salt could be sold for \$2.00, which would leave a profit of \$0.40. 3. The statement is false for several reasons. First, if the demand for Internet services increases and nothing else changes, the price of Internet service will rise not fall. Second, if the price of Internet services falls, the supply of Internet services does not change. Rather, there is a decrease in the quantity supplied, that is, a movement along the supply curve rather than a shift of the supply curve. 5. a. (ii) and (iii) and (iv) The demand for gasoline will change if the price of a car changes, all speed limits on highways are abolished, or robot production cuts the cost of producing a car. If the price of a car rises, the quantity of cars bought decrease. So the demand for gasoline decreases. If all speed limits on highways are abolished, people will drive faster and use more

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solutions03 - C h a p t e r 3 DEMAND AND SUPPLY Solutions...

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