Welcome to Law-Forums.org!   

Advertisments:




Sponsor Links:

Discount Legal Forms
Discounted Legal Texts


Simple Economics question. Please help me out.?

Discuss anything relating to Consumer Law

Simple Economics question. Please help me out.?

Postby denzell » Mon Dec 12, 2011 3:42 am

If the price of aluminum (a substitute for steal) rises, what happens to the steel producer's supply curve? The supply curve
a) shifts to the left
b) shifts to the right
c) remains unchanged

I am an undergrad in economics and this question should be extremely easy for me. But I am convinced its C, because a higher price for the substitute would create more consumer demand for the product that is cheaper or is less expensive. So, the demand curve for steal would shift right and the new equilibrium would be at a higher quantity sold and at a higher price without a change in supply. But the book says the answer is B. But I totally disagree. What am I missing?

Help me out.
denzell
 
Posts: 20
Joined: Fri Apr 01, 2011 3:45 pm
Top

Simple Economics question. Please help me out.?

Postby ammi » Mon Dec 12, 2011 3:45 am

Aluminium is a very poor substitute for steel, but that's largely beside the point.

The answer is C. Any other answer requires you to consider second round effects and (preferably) for the production of steel to be a perfectly competitive market (clearly, it isn't).

Suggest the book's authors probably got their words mixed up when writing the question.
ammi
 
Posts: 22
Joined: Sat Apr 02, 2011 8:38 am
Top

Simple Economics question. Please help me out.?

Postby hjortur » Mon Dec 12, 2011 3:52 am

Aluminium is a very poor substitute for steel, but that's largely beside the point.

The answer is C. Any other answer requires you to consider second round effects and (preferably) for the production of steel to be a perfectly competitive market (clearly, it isn't).

Suggest the book's authors probably got their words mixed up when writing the question.
unless the firms are colluding, the supply curve should remain unchanged and demand for steel will increase.
hjortur
 
Posts: 30
Joined: Thu Mar 31, 2011 5:52 am
Top

Simple Economics question. Please help me out.?

Postby garwyli91 » Mon Dec 12, 2011 3:57 am

C
garwyli91
 
Posts: 24
Joined: Thu Mar 31, 2011 7:48 pm
Top


Return to Consumer Law

 


  • Related topics
    Replies
    Views
    Last post