Suppose That the Market for Haircuts in a Community Is

question 139

Multiple Choice

Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium.Subsequently,a decrease in population decreases the demand for haircuts.In the short run,we expect that the market price will _____ and the output of a typical firm will _____.

• A)rise;rise
• B)rise;fall
• C)fall;rise
• D)fall;fall

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Definitions:

Inflation

An economic condition characterized by a general increase in prices and fall in the purchasing value of money.

Utility Function

A mathematical representation of how different bundles of goods or services rank according to their utility (satisfaction) for an individual or entity.

Consumption

The use of goods and services by households or individuals, typically measured in economic studies to assess economic activity or well-being.

Budget Line

A graphical representation of all possible combinations of two goods that a consumer can afford with a given budget at prevailing prices.