4. micro - made no change in supply, so they're selling the...

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Maya Cohen 066370065 Exercise # 4 1. The comment is false because the connection between the two is effected by the change in price. But it also draws them always into the balance point, which is the equilibrium point. It is true that the supply and demand move together, but the price demand goes back up to the equilibrium so to match the supply curve. 2. The new price effects everyone. The private arena enjoys the change. The public arena created the change and they are enjoying it too, but not to a high extent since the price went back to the new equilibrium. And the producers are suffering from the change because the decrease in demand lowered the price for each unit sold and therefore lowered their profits. 3. The plains lose from this change, because, the price of each product went down but they
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Unformatted text preview: made no change in supply, so they're selling the amount for a lower price. The final price mediates itself and the consumers are getting a better price over all. 4. In the northern economy we have cheap fruit and in the southern economy expensive fruit. If we built a bridge the flow would be from north to south, because people would like to buy cheaper fruit. The effect to that would be a price increase in the north (fewer products- more demand- higher price) and a price decrease in the south (vise versa). 5. In order for the suppliers to earn money by producing smaller amount than the equilibrium point we need to make the percentage of price change bigger than the percentage of quantity change. And that would mean that the elasticity in that area is smaller than one....
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This note was uploaded on 10/25/2009 for the course BUSINESS 772 taught by Professor Sadeh during the Spring '07 term at Interdisciplinary Center Herzliya.

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