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Question: 1 john is studying the effects of income on the...

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1. John is studying the effects of income on the demand for peppers. Which factors are held constant when using the "ceteris paribus" assumption?

income

all factors affecting demand, except income

all factors affecting demand, including income

none of the above

Only price could change the ceteris paribus. Change of income can affect demand. Do we disregard this in ceteris paribus?

2. If supply and demand shift simultaneously, the equilibrium price __________________.

  • must decrease if the equilibrium quantity increases and must increase if the equilibrium quantity decreases.

  • must increase if the equilibrium quantity increases and must decrease if the equilibrium quantity decreases.

  • could decrease if the equilibrium quantity increases and could increase if the equilibrium quantity decreases.

  • could increase if the equilibrium quantity increases and could decrease if the equilibrium quantity decreases.

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