Econ 121, Fall 2018, 6776 nd 8 Homework: HW Ch. 3 Score: 0 of 1 pt End of Chapte

Question

Econ 121, Fall 2018, 6776 nd 8 Homework: HW Ch. 3 Score: 0 of 1 pt End of Chapter 4.14 41 of 45 (38 complete) HW Score:7 ions Electrolytes are an input to some brands of premium bottled water, so a fall in the price of electrolytes will cause the supply curve for premium bottiled water to shift to the right (from s, to S2) this shift in the supply curve results in a lower price (P2).consumers will want to buy more premium bottled water and the demand curve will shift to the right (from D1 to D2) We know that more premium bottied water will be sold, but we can't be sure whether the price of premium bottled water will rise or fall. That depends on whether the supply curve or the demand curve has shifted farther to the right I assume that the eftect on supply is greater than the effect on demand, so I show the final equlbrium price (Ps) as being lower than the initial equilbrium price (Pi) Where is the flaw in the students argument? O Supply will shuift inward Demand will not shift Clear All All parts e

Explanation / Answer

Answer - We know that demand curve shifts when any factor that we consider as constant changes except price of own good. In above example no factor has been changed which affects demand. Thus, demand curve will not shift. There will be extension of demand not 'shift' in demand. Supply curve shifts because input price goes down, as result price would also go down and market quantity will increase. Buyers will buy more quantity of premium bottled water.

Option B is the correct answer.

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