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Chapter 3: Q 12. (page 78)

What determines the level of prices in a market?

Short Answer

Expert verified

Demand and supply determine the level of prices in a market.

Step by step solution

01

Step 1. Define price.

The price of a product is the amount of money that must be spent to obtain it.

02

Step 2. What factors influence a market's pricing level?

The junction between demand and supply in a market determines market prices. The ability and willingness of a person to purchase products and services at a certain price is referred to as demand. The ability and willingness of a producer to supply items at a certain price is referred to as supply. Demand and supply work together to establish the price at which goods are bought and sold in a market.

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Most popular questions from this chapter

Suppose there is a soda tax to curb obesity. What should a reduction in the soda tax do to the supply of sodas and to the equilibrium price and quantity? Can you show this graphically? Hint: Assume that the soda tax is collected from the sellers.

What is producer surplus? How is it illustrated on a demand and supply diagram?

Most government policy decisions have winners and losers. What are the effects of raising the minimum wage? It is more complex than simply producers lose and workers gain. Who are the winners and who are the losers, and what exactly do they win and lose? To what extent does the policy change achieve its goals?

Does a price floor attempt to make a price higher or lower?

Why do economists use the ceteris paribus assumption?
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