Which of the following is most likely to increase consumer surplus in the market for cotton T-shirts?
a) The price of polyester T-shirts falls.
b) The price of industrial sewing machines used to produce garments increases.
c) Consumer incomes fall and cotton T-shirts are normal goods.
d) Weather conditions provide for an extremely productive cotton harvest.
24. Consider the market for milkshakes. An increase in the consumer surplus may result from:
a) an increase in the supply of milkshakes.
b) a decrease in the demand for milkshakes.
c) a decrease in the supply of milkshakes.
d) an increase in the price of milkshakes.
27. The equilibrium price in market A is $24. The current price in market A is $21. At this price, there is
a. a surplus of supply in market A.
b. pressure for the price to decrease in market A
c. equilibrium in market A.
d. a shortage of supply in market A.
If someone could explain the answers to the above, it'd be great! thanks!
Answers & Comments
Verified answer
First question: answer is D. Good weather conditions decrease the price of cotton, which either increases the quantity, or reduces the price of cotton shirts - in both cases increasing consumer surplus.
24) answer is A. An increase in supply decreases price and increases quantity; again, increasing consumer surplus.
27) the answer is D. The reason is because when the price is lower than the equilibrium price, you have more demand than supply, and therefore a shortage
Im not one for repeating other people's answers, but I will answer when I think there is a mistake. I think 24 could be D because an increase in supply will reduce equilibrium price and increase quantity demanded whereas an increase in the price above equilibrium price would result in a surplus, i think