Chapter 6: Section 3

Background note about price:  Apple introduced a black version if its popular iPod in the fall of 2005.  It was technically identical to the traditional white version and sold for the same price.  Inventories of the black version were quickly depleted, while the white iPod remained in stock.  Apple continued to sell both versions at the same price.  The company reacted to this price signal in a different way, however.  When it introduced its new laptop computer, MacBook, in the spring of 2006, the white machines sold for $1349.  The identical black MacBook cost $1499.

Assignment:

• #2: Prices often act as signals.  Describe how prices acted as a signal or an incentive in the last two major purchases that you made.
• #5: Why do buyers and sellers conduct business on the black market?
• #7a: What is the quickest way to solve a shortage?
• #7b: What is the quickest way to eliminate a surplus?
• #9: Describe three market problems that prevent efficient allocation of resources.
• #10: Look at the illustrated "Economics & You" feature (p.153) on profit incentive.  List additional examples of how the desire for profit motivates people.
• Do you agree or disagree that incentives motivate people's actions?  How do incentives affect your daily life?