PS2_Solutions - AEM 4150 PRICE ANALYSIS Fall 2008 Problem Set#2 Suggested Solutions 1(a clothes Meat Broadness(b Advertising usually changes

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AEM 4150 PRICE ANALYSIS Fall 2008 Problem Set #2 Suggested Solutions 1. (a) clothes Meat. Broadness. (b) Advertising usually changes consumer demand through consumers’ tastes and preferences. Positive information may shift demand curve to the right, and negative information may shift demand curve to the left. Advertising can also affect the price elasticity of demand. (c) For example, orange, grape, soy milk, and BMW cars. (d) False. It is true that two goods are substitutes if an increase in the price of one makes the other relatively more attractive, but this result in an increase in demand (not an increase in quantity demanded ). (e) False. Agricultural products generally are price inelastic, thus a price decrease often leads to lower revenue. To the contrary, a price increase often leads to higher revenue. Therefore, lowering price is not more beneficial to agricultural producers. (f)
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This homework help was uploaded on 02/20/2009 for the course AEM 4150 taught by Professor Kaiser,h.m. during the Fall '07 term at Cornell University (Engineering School).

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PS2_Solutions - AEM 4150 PRICE ANALYSIS Fall 2008 Problem Set#2 Suggested Solutions 1(a clothes Meat Broadness(b Advertising usually changes

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