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In: Economics

29.) Over time, technological improvement lowers the cost of producing smartphones and also raises buyers’ incomes....

29.) Over time, technological improvement lowers the cost of producing smartphones and also raises buyers’ incomes. Assume that smartphones are normal goods.

As a result, the supply of smartphones will (increase, decrease) and the demand for smartphones will (increase, decrease). We would expect the equilibrium quantity of cellphones bought and sold will (increase, decrease, stay the same), while the price of smartphones could rise, fall, or stay the same. (6 points; 2 points each)

35.) American University is interested in increasing total revenue from ticket sales to the public for basketball games at Bender Arena. Suppose AU estimates that the demand for basketball tickets is elastic. Should AU increase or decrease ticket prices sold to the public to raise total revenue? (increase, decrease) (1 point)

38.) The price of gasoline rose sharply last month, while the quantity sold remained the same. Three people offer possible explanations:

a.) Alice: Demand increased, but supply was perfectly inelastic.
b.) Beth: Demand increased, but supply decreased at the same time. c.) Colleen: Supply decreased, but demand was perfectly inelastic

Solutions

Expert Solution

Over time, technological improvement lowers the cost of producing smartphones and also raises buyers’ incomes. Assume that smartphones are normal goods. As a result, the supply of smartphones will increase and the demand for smartphones will increase, decrease. We would expect the equilibrium quantity of cellphones bought and sold will increase, while the price of smartphones could rise, fall, or stay the same.

American University is interested in increasing total revenue from ticket sales to the public for basketball games at Bender Arena. Suppose AU estimates that the demand for basketball tickets is elastic. AU should decrease the ticket prices sold to raise total revenue. When demand is elastic – a fall in price leads to a rise in total revenue,

The price of gasoline rose sharply last month, while the quantity sold remained the same. Three people offer possible explanations:  Colleen: Supply decreased, but demand was perfectly inelastic.


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