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Statements Containing Common Errors

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The following two sets of statements contain common errors. Identify and explain each.

A) Demand increases, causing prices to rise. Higher prices cause demand to fall. Therefore, prices fall back to their original levels.

B) The supply of meat in France increases, causing meat prices to fall. Lower prices always mean that French households spend more on meat.

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Solution Summary

This solution discusses two sets of statements.

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A. The increase in demand is represented by an outward shift in the demand curve. The price increases because buyers bid up the price. There would be no tendency for prices ...

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