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1)Suppose that horses are an inferior good

Economics

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1)Suppose that horses are an inferior good. Over the last 100 years people have gotten increasingly wealthy. Also, farming has improved the cost it takes to feed horses. Holding all else constant, which of the following will occur to the price and quantity of horses in equilibrium?
a. An increase in the price of horses and an increase in the quantity of horses.
b. An increase in the price of horses and a decrease in the quantity of horses.
c. An decrease in the price of horses and an increase in the quantity of horses.
d. An decrease in the price of horses and a decrease in the quantity of horses.
e. A decrease in the price of horses and an uncertain change in the quantity of horses.
Why is the answer e? If horses are an inferior good, wouldn't the quantity decrease when income increases?

2)Week 4: Crisis of Credit Discussion

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Crisis of Credit: Banks

After work your Connect homework and read through the module power points and watch the embedded videos, I want you to answer these two questions by posting in the discussion board.  These are opinions based on your understanding of the topics. There aren't necessarily any right or wrong answers here, but rather logical conclusions to discuss.

To answer each question below - give me at least one definition, topic, or example from our module power points AND clarify why you are using this example to answer the posed question, using your understanding of the topics:

1. Explain how banks dealing in leverage are a necessary part of our economy?
2. Banks need to deal in leverage and risk to make a profit. In your opinion, are CDO's and/or adjustable rate mortgages necessary tools for banks to use to be profitable? Why?

3)Explain how and why the “invisible hand” works to ensure that producers provide quality services and products for consumers.