Determine whether each of the following events causes a shift of a curve or a movement along a curve in the short run. Indicate
which curve is involved and the direction of the change. As a result of an increase in the value of the dollar relative to other currencies, American producers pay less in dollar terms for foreign steel, a major commodity used in production. This will cause a the aggregate curve to the .
1 answer:
Answer:
Check the explanation
Explanation:
Increase in value of dollar has made the foreign steel (a major commodity used in production) cheaper for American producers.
This will reduce the cost of production of American Producers and would increase their profit-margin.
This will induce US firms to produce more and therefore there will be increase in short-run aggregate supply.
So, the given scenario will involve short-run aggregate supply curve and would shift the curve to the right.
Kindly check the attached image below to see the required graph -
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Answer:
Sam: Supply decreased, but demand was perfectly elastic.
Explanation:
Sam is right because the only possible explanation is that the demand is perfectly elastic and the supply decreased. When the price elasticity of demand is perfectly elastic, the demand curve is completely horizontal. Since the price of coffee remained the same, that means that the quantity demanded will decrease only if the supply of coffee decreased.
