15 14 12 11 10 10 12 16 Quantity of Chips Assume lines M, N and O are demand cur

Question

15 14 12 11 10 10 12 16 Quantity of Chips Assume lines M, N and O are demand curves for chips. Assume that curve N is the initial relevant demand curve. Assume chips and popcorn are substitutes and normal goods. Assume chips and salsa are complements and normal goods. For the following questions the appropriate answers are: O. move from curve N to O M. move from curve N to M U. move up and to the left along curve N D. move down and to the right along curve N I. indeterminable with given information Circle O, M, U, D, orI for each question. In each case, assume you started somewhere on curve N for each question 1. If the price of chips decreases, you would represent it by O MU DI 2. If the price of chips increases, you would represent it by O MUDL 3. You would represent an increase in consumer income by O M U D 4. You would represent effective advertising of salsa by OMUD1 5. You would represent a decrease in price of salsa by O MUDI 6. You would represent a decrease in population in the area by OMUDI 7. You would represent news that chips consumption may be good for your health by O MUDI 8. You would represent a decrease in the price of popcorn by O MU DI 9. You would represent a decrease in the supply of chips byOMUDI 10. You would represent an increase in the price of candy by OMUDI

Explanation / Answer

1) The answer is D. (Because there is a movement down along the demand curve N)

2) THe asnwer is U. ( becasue there is movement up along the demand curve N).

3) The asnwer is O. ( becasue demand curve shift to O from N indicating higher demand at each price level).

4) The answer is M . - ( because demand will decrease of chips ).

5) The answer is O - ( because demand for chips will increase because they both are complementary goods and complementary goods has negative cross elasticity of demand)

6) THe asnwer is M - ( because population decrease , demand will also decrease)

7) THe asnwer is O - ( because demand will increase at each price level).

8) The answer is M.

9)The asnwer is I.

10) The asnwer is I.

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