ECN 104 Study Guide - Midterm Guide: Absolute Advantage, Comparative Advantage, Multiple Choice
Document Summary
A minimum of 2 marks was given if you wrote anything. In general: graphs worth 2 marks each if done correctly. 2 marks if you explained the price/demand relationship in each market (dollar votes in detail), 2 marks if you explained the self interest of firms to gain profit. Ldc market: when demand for ldcs increases, the ldc market will experience excess demand. Excess demand will put pressure on the price to rise. As price rises, quantity supplied rises (and quantity demanded decreases a bit). Because firms seek high profits, and they see a high price in the ldc market, firms currently producing. Ldcs will produce more, and firms not producing ldcs may decide to enter this market and produce ldcs to gain the high profits. Extra: if more firms enter the ldc market, the supply curve would shift out, lowering the price of ldcs. Crt market: when demand for crts decreases, the crt market will experience a surplus.
