HW01-EC11-Solution

Wareffortswouldincreasethe

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Unformatted text preview: price of beef decreases because a drought forces supplier to bring more animals to market? The price of hides will fall because more the supply of cattle has increased. o What happens to the supply of civilian aircraft in the U.S. when the U.S. declares war? Civilian aircrafts and war aircrafts are manufactured from the same types of raw materials and using the same types of equipment. War efforts would increase the demand for war aircrafts and subsequently their prices; hence the manufacturers would divert the raw materials and equipment towards manufacturing of war aircrafts and decrease the supply of civilian aircrafts. Civilian aircrafts and war aircrafts are substitutes in supply. o Suppose corn and wheat can grow on the same type of land. What happens to the supply of wheat when the price of corn increases? The supply of wheat would decrease as it is more profitable for farmers to grow corn— corn and wheat are substitutes in supply. Supply & demand o Why does marginal cost of the pro...
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This note was uploaded on 11/07/2013 for the course ECON 11 taught by Professor Rosenthal during the Spring '10 term at Caltech.

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