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Chapter 2

Chapter 2 Solution.pdf

9 Pages
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Department
Economics
Course Code
ECON 3411
Professor
all

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Description
Chapter 02Market Forces Demand and SupplyChapter 2 Answers to Questions and Problems 1a Since X is a normal good a decrease in income will lead to a decrease in the demand for X the demand curve for X will shift to the left b Since Y is an inferior good an increase in income will lead to a decrease in the demand for good Y the demand curve for Y will shift to the left c Since goods X and Y are substitutes an increase in the price of good Y will lead to an increase in the demand for good X the demand curve for X will shift to the right d No The term inferior good does not mean inferior quality it simply means that income and consumption are inversely related2 a The supply of good X will increase shift to the right b The supply of good X will decrease More specifically the supply curve will shift vertically up by exactly 3 at each level of output c The supply of good X will decrease More specifically the supply curve will rotate counterclockwise d The supply curve for good X will increase shift to the right 3 aunits b Notice that althoughnegative output isimpossible Thus quantity supplied is zero c To find the supply function insert P60 into the supply equation to obtain z Thus the supply equation isTo obtain the inverse supply equation simply solve this equation for P to obtain The inverse supply function is graphed in xFigure 21212014 by McGrawHill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied scanned duplicated forwarded distributed or posted on a website in whole or part
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