Asked by lydia snyder on May 31, 2024
Verified
Refer to Figure 20.3. The domestic price of shoes is $80. After trade the price of a pair of shoes is $60. If shoes are a normal good and income in this country rises, then we would expect
A) the number of pairs of shoes imported into this country to increase.
B) the number of pairs of shoes imported into this country to decrease.
C) the number of pairs of shoes exported from this country to increase.
D) the number of pairs of shoes exported from this country to decrease.
Normal Good
A product whose demand increases when income rises and decreases when income falls, under the assumption that all other factors remain constant.
Domestic Price
The price of a good or service within a country, influenced by local demand and supply conditions, taxes, and costs of production.
Trade Price
The price at which goods are sold between companies before they reach the final consumer, often lower than the retail price.
- Grasp how income changes can affect the demand for imports in a country.
Verified Answer
SC
Saadhvi ChariJun 01, 2024
Final Answer :
A
Explanation :
Since shoes are a normal good, an increase in income would lead to an increase in demand for shoes. If the domestic price is higher than the world price (after trade, the price is $60), the country is importing shoes. With higher demand due to increased income, the number of shoes imported would increase to meet this demand.
Learning Objectives
- Grasp how income changes can affect the demand for imports in a country.