hw2 econ - Homework Assignment 2 1. A. B. In equilibrium,...

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Homework Assignment 2 1. A. B. In equilibrium, the quantity demanded is equal to the quantity supplied. In this market, the equilibrium price is $300 per unit bicycle and the equilibrium quantity is 50 units of bicycle. C. If the market price were $100, there would be a shortage. The size of the shortage is 40 units of bicycle. This will cause the prices to rise. D. The market tends to have a single price, the equilibrium price. If the market price is above the equilibrium level, the surplus leads buyers and sellers to take actions to lower the price. And if the market price is below the equilibrium level, the shortage leads buyers and sellers to take actions to raise the price. So the market price always moves toward the equilibrium price. E. If the price of bicycle helmets declined, the demand of bicycles will increase. This is because the bicycle helmet is a complement for bicycle, the decreased price of bicycle helmets will increase the quantity demanded of bicycle helmets, thus increasing the demand of bicycles. And in this market, the
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This note was uploaded on 01/25/2012 for the course AS 195.603 taught by Professor C.b. during the Fall '11 term at Johns Hopkins.

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hw2 econ - Homework Assignment 2 1. A. B. In equilibrium,...

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