DemandChangePriceExpectations

by jwietl
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DemandChangePriceExpectations

I’m ______________________ speaking to you from Joliet Central High School, room 377 for the Institute for the Teaching of Economics in All Subject Areas. You are listening to:The Institute for the Teaching of Economics in All Subject AreasVolume Two, Issue FiveDeterminants of Demand/Change in Consumer Price ExpectationsThe Cold War, or war of words, that began between the former Soviet Union and the United States following World War II was fueled in large part by the proliferation of nuclear weapons. Since the development of the atomic bomb by scientists participating in the Manhattan Project and the use of atomic weapons to end World War II, the world has lived under the threat of global thermonuclear war. In 1962, this threat reached a peak during the Cuban Missile Crisis. In response to this growing threat, many Americans invested in basement fallout shelters. However, beginning with the Limited Test Ban Treaty in 1963, the leaders of the former Soviet Union, Nikita Krushchev, and the United States, John F. Kennedy, set in motion a series of treaties between the two countries that would eventually lead to détente, or a relaxation of tensions between the two superpowers. As Americans witnessed this easing of tensions, their tensions regarding the price of basement fallout shelters also began to ease. As a result, building and owning a basement fallout shelter did not hold the same sense of urgency it did prior to negotiations between the former Soviet Union and the United States. According to economic theory, a decrease in price expectations for basement fallout shelters will cause demand to decrease. This is shown by shifting the demand curve for basement fallout shelters down and to the left. As a result, price will decrease and quantity demanded will also decrease.


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