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Unformatted text preview: SD_2010-2011/2 6. The currency used by the Confederate States of America during its brief existence from 1861 to 1865 has become a collector's item today. The Confederate Currency supply is perfectly inelastic. As the demand for the collectible increases and some of the old currency is destroyed or no longer of value as a collectible, what happens to the market price? Solution: The increase in demand for Confederate currency will result in a rightward shift of demand from D to D 1 . This demand effect will put upward pressure on the price of Confederate currency. As some of the collectibles deteriorate and become worthless, the supply curve shifts back to the left as indicated above by the movement from S to S 1 . The supply effect places upward pressure on prices. Both effects put upward pressure on prices, so we can say unambiguously that prices for Confederate currency will rise. 7. The demand for packs of Pokémon cards is given by the equation 500,000 45,000 . D Q P =- At a price of $2.50 per pack, what is the quantity demanded? At $5.00 per pack, what is the price elasticity of demand? Solution: At a price of $2.50 per pack, the quantity demanded is 387,500 packs of cards. At a price of $5.00 per pack, the quantity demanded is 275,000. At $5.00 per pack, the price elasticity of $5....
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This note was uploaded on 01/30/2012 for the course ECON 121 taught by Professor Abi during the Spring '11 term at Abu Dhabi University.
- Spring '11