Texts: Introduction to Supply and Demand
For each part of this question, explain whether the given statement makes Good Economic Sense. "Explain" means state whether the statement makes sense or not and then give an appropriate economic reason why the statement does or does not make sense.
a. In an analysis of housing prices, a newspaper reporter wrote, "when there is a shortage of something, consumers will eventually give up trying to buy it, so the demand for that thing decreases, and the price falls until the market is finally in equilibrium." Does this statement make Good Economic Sense?
b. During the last couple of months, the prices of food products in the U.S. have been rising. At the same time, the quantities of food products consumed in the U.S. have been increasing. An online news analysis said, "the higher price of food combined with the increased quantity of food purchased shows that the so-called Law of Demand does not apply to necessary products such as food." Does this statement about the Law of Demand make Good Economic Sense?
c. A small city has a summer baseball team that plays its games at the local high school field. The team is popular with local residents who come to watch the games. But many fans are unhappy that there is a shortage of parking near the field, so they have to park farther away than they would like to. One fan wrote a letter to the local newspaper, urging people to get to the games earlier, saying that arriving early would eliminate the shortage of parking. Does this fan's advice make Good Economic Sense?