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Serjik [45]
3 years ago
8

Which type of demand for money causes the demand for money curve to slope downward? question 2 options: 1) speculative demand. 2

) precautionary demand?
Business
1 answer:
Orlov [11]3 years ago
6 0
1) Speculative Demand
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accrued basis income: 14,300

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The price of coffe beans use to make coffee has decreased. At the same time, the price of cream (a compliment good) has increase
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Answer:

The correct answer is:

Equilibrium price will decrease; the effect on quantity is ambiguous. (D)

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First, note that if the price of coffee beans, used in the manufacture of coffee decreases, the price of coffee sold to consumers will decrease, because it takes a lesser amount in manufacturing than it used to, therefore this reduction in manufacturing costs is reflected in the selling price.

Next, it is hard to tell whether this reduction in equilibrium price will affect quantity demanded, because, at the same time, the price of cream ( a complementary good) increases, and since both goods are complementary, they are bought together, and the effect of the reduction in the price of coffee might not necessarily caused an increase in the quantity demanded because this effect is cancelled out by the increase in the price of cream, hence the effect on quantity is ambiguous.

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