Suppose That We Are in a Condition of "Stuck" Prices

question 22

Essay

Suppose that we are in a condition of "stuck" prices so that the price of wooden chairs will not go above or below $125/unit.Further suppose that chair factories have been built on a business plan designed to deliver 200/month.How many chairs will be sold in a market in which demand (which includes a modest amount of inventory) is characterized by: (a) P = 425 - 1.5Q, (b) P = 530 - 1.5Q, and (c) P = 400 - 0.5Q, where P is in $/chair and Q is in chairs/month? In each case, what happens to planned inventory.

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Definitions:

Gray Davis

An American politician and attorney who served as the 37th governor of California from 1999 until being recalled in 2003.

Warren Harding

The 29th President of the United States (1921-1923), whose term was known for significant economic growth but also for scandals that tarnished his administration.

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David Dinkins was the first African American mayor of New York City, serving from 1990 to 1993.

Initiative Process

A form of direct democracy that allows citizens to propose and vote on legislation or constitutional amendments.