In this video, we discuss how markets link people and places all over the world. We’ll take a look at production and consumption markets and, importantly, the role
In this video, we discuss how markets link people and places all over the world. We’ll take a look at production and consumption markets and, importantly, the role that prices play in it all. Following up on our example of a rose, we take a look at other global products such as the Apple iPhone. Where is the iPhone made? It’s produced by thousands of people all over the world, working in cooperation in order to make one product that many of us enjoy. Join us as we observe the invisible hand in action.
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Would it be possible to have discussion forum for practice questions? Or would it be possible to have explanation for answers?
For example, for question 'Given your prediction about the change in the price of paper, how would the price of pencils change? (Hint: are paper and pencils complements or substitutes?)', below is correct answer as per the validator:
"d. Fall, because demand would shift to the left.".
Paper & pencil complement each other. If price for a product increase as a result of high demand, it's complement demand increases & results in price. But I don't understand why validator says, pencil price decreases!!!
1. Price of paper has increased due to increase in demand of cookbooks, supply of paper has not changed. So with more paper going towards printing of cookbooks, there is less paper left for other things. With less paper, there will be decrease in demand of pencils and so price of pencil falls.
2. In general when price of paper increases, demand decreases. With decrease in demand of paper, demand of pencil also decreases and so its price will also decrease.
3. In general, people have fixed budget for things they do. Paper and pencil are complementary. If a person has 10 dollars to buy paper and pencil to write and if price of paper increases, he/she will have less money to buy pencil. He will buy less pencil and with decrease in demand, price of pencil will fall.