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Problem 3: The following events occur in the market for good B, which is a normal good:

a) Good B becomes more fashionable and popular.

b) The price of good C, a substitute for good B, goes down.

c) Consumers anticipate declining prices.

d) There is a surge in the population that uses good B.

e) Income falls for a large subset of consumers who buy good B.

Identify the impact of the event to the equilibrium price and quantity of each event.

PLEASE DRAW a supporting diagram to help you work through the logic,

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Elin HesselLv2

26 Jan 2019

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Related questions

Problem 1: The following events occur in the market for good B, which is a normal good:

a) Good B becomes more fashionable and popular.

b) The price of good C, a substitute for good B, goes down.

c) Consumers anticipate declining prices.

d) There is a surge in the population that uses good B.

e) Income falls for a large subset of consumers who buy good B.

Identify the impact of the event to the equilibrium price and quantity of each event.

1)The law of demand states that as the price of a good rise, _____.

A. buyers purchase more of the good because the price of a substitute has risen.

B. buyers purchase less of the good because their real income decreases with an increase in price.

C. buyers purchase more of the good because they expect prices to be even higher in the future

D. buyers purchase less of the good because they expect prices to fall in the future.

2) A movement along a demand curve can be attributed to a change in:

A. the quantity demanded of a good.

B. the demand for a good.

C. the substitution effect of consuming a good.

D. the opportunity cost of producing a good.

3) If we say that demand for a good has increased, we mean that there has been:

A. a leftward shift of the demand curve.

B. a rightward shift of the demand curve.

C. a leftward movement along the demand curve.

D. a rightward movement along the demand curve.

4) Which of the following will cause the demand curve for a normal good to shift to the right?

A. An increase in the price of a complementary good.

B. A decrease in income.

C. A decrease in the price of the good.

D. An increase in the price of a substitute good.

5)Which of the following best defines supply?

A. The amount of a good that is produced at the least possible cost, other things constant

B. The amount of a good that producers are willing and able to sell at each possible price, other things constant.

C. The amount of a good that consumers want to buy at different income levels

D. The amount of a good that producers want to sell at a fixed price

6)The market supply curve of a particular product indicates the total quantities:

A. that are actually sold during a given time period.

B. that sellers are willing to offer for sale at a fixed price.

C. that buyers are willing to purchase at alternative prices.

D. that sellers are willing and able to offer at alternative prices.

7)When quantity demanded of a good exceeds the quantity supplied at the prevailing market price, _____.

A. the demand curve shifts rightward until the surplus is eliminated

B. the market is in equilibrium.

C. the price of the good will tend to increase.

D. the price of the good will decrease

8)A shortage of textbooks is most likely to cause:

A. an increase in the price of textbooks.

B. a decrease in the supply of textbooks.

C. a decrease in the price of paper.

D. an increase in the cost of printing.

9)The most important characteristic of the equilibrium price is that it:

A. maximizes the quantity demanded.

B. clears the market, leaving neither a surplus nor a shortage.

C. minimizes the quantity demanded.

D. guarantees that producers earn the profit.

10)If both demand and supply increases in a market that is initially in equilibrium, the price will:

A. increase only if demand increases more than supply.

B. increase only if supply increases more than demand.

C. remain unchanged while quantity will increase.

D. remain unchanged while quantity will decrease.

lavendertrout13

Assignment Demand & Supply

In each of the following scenarios decide if the product is moving along the curve ( The price of diamonds has gone from $ 1,000 a karat to $ 2,000 a karat, this represents movement along the curve. Higher the price less of the demand.) OR If the product's determinants have shifted the curve. (flat screen TVs have become more popular (notice no mention of price). The demand curve has shifted to the right.)

If it helps you may want to think of product B as Butter or Baby dolls

What effect will each of the following have on the demand for product B?

A. Product B becomes more fashionable

B. The price subsitute product C Falls

C. Income declines and product B is an inferior good

D. Consumers anticipate that the price of B will be lower in the near futre.

E. The price of complementary product D falls

What effect will each of the following have on the supply of product B?

a. A technological advance in the methods producing product B.

b. A decline in the number of firms in industry B.

c. An increase in the prices of resources required in the production of B.

d. The expectation that the equilibrium price of B will be lower in the future than it is currently.