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Chapter 4

This

**preview**shows half of the first page. to view the full**1 pages of the document.**CHAPTER 4 PROBLEMS AND APPLICATIONS ANSWERS

For questions 3 and 5 I have given the shifts and the change in P and Q. Of course in

your answers, you should be drawing the diagrams for each part. Also, consider each

part separately.

3. a. D increases; P and Q both increase.

b. S decreases; P increases and Q decreases.

c. S increases; P decreases and Q increases.

d. D increases; P and Q both increase.

e. D decreases: P and Q both decrease.

5. a. S decreases; P rises and Q falls.

b. D decreases; P and Q both fall.

c. D increases; P and Q both rise.

d. S increases; P falls and Q rises.

7. Look at the markets sequentially and do not look back – so first, what happens to

equilibrium price and quantity in the market for ketchup when the price of hot

dogs rises? Next, given the change in P and Q for ketchup, what happens to the

market for tomatoes? Keep going with the last two markets, in order.

10. To answer this question completely, you need to draw 4 diagrams for part (a) and

4 diagrams for part (b).

12. This is a great question and it’s harder than the others. Read carefully.

13. P = $0.20

Q = 1540

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