Question
1. For each stock in the stock market, the number of shares sold daily equals the number of shares purchased. That is, the quantity of
1. For each stock in the stock market, the number of shares sold daily equals the number of shares purchased. That is, the quantity of each firm's shares demanded equals the quantity supplied. So, if this equality always occurs, why do the prices of stock shares ever change?
2. Explain how each of four different factors can affect the price elasticity of demand. Give an example for each determinant.
3. Columns 1 through 3 in the table below show the marginal utility which a particular consumer would get by purchasing various quantities of products A, B, and C.
Unit of product | (1) Marginal utility, A | (2) Marginal utility, B | (3) Marginal utility, C |
First | 18 | 39 | 12 |
Second | 16 | 36 | 10 |
Third | 14 | 33 | 9 |
Fourth | 12 | 30 | 8 |
Fifth | 10 | 27 | 7 |
Sixth | 8 | 24 | 5 |
Seventh | 6 | 21 | 3 |
If the prices of A, B, and C are $2, $3, and $1, respectively, and the consumer has $26 to spend on these three products, what combination of the three products should be purchased in order to maximize utility?
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