1.Demand a. The law of demand states there is a(n) ________________________relat
ID: 1133422 • Letter: 1
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1.Demand a. The law of demand states there is a(n) ________________________relationship between the ________________ of X and the _________________________ of X, ceteris paribus Indicate whether the following change in economic circumstance, ceteris paribus, will increase, decrease, or have no effect on the demand for product X. b.____________Decrease in income, assume product X is a normal good c.____________ Decrease in the price of Y, products X and Y are substitutes d.____________Increase in the price of Z, products X and Z are complements e.____________Buyers expect the price of X to decrease in the near future f.____________Decrease in the price of X 2.Critical thinking using the lens of economics a.Children are inferior “goods.” Do you agree or disagree? Explain your answer. b.During the real estate boom between the early 2000s and 2007 the prices of homes rose year after year yet people purchased more homes year after year. A TV commentator recently said, “This economic event was an exception to the law of demand.” Do you agree or disagree? Explain your answer. 3.Indicate whether the following change in economic circumstance, ceteris paribus, will increase, decrease, or have no effect on the supply of product X. a.____________Increase in the price of resources used to produce product X b.____________Technological advance increases labor productivity c.____________Decrease in the number of firms producing product X d.____________Decrease in the number of people buying product X e.____________Decrease in the price of X 4.Congress increases the excise tax on a gallon of gasoline by $1.00. Given this change in economic circumstance, ceteris paribus, a.the demand for gasoline would ______________________________, b.the supply of gasoline would ______________________________. Use your answers to (a) and (b) to illustrate graphically what happens in the gasoline market. Predict the direction of change in equilibrium price (P) and quantity (Q). c.Market for gasoline P: _______________ d. Q: _______________ 5.Goods X and Y are complements in consumption. Higher production costs increase the price of good X. Given this change in economic circumstance, ceteris paribus, a.the demand for good Y would ______________________________, b.the supply of good Y would ______________________________. Use your answers to (a) and (b) to illustrate graphically what happens in the market for good Y. Predict the direction of change in equilibrium price (P) and quantity (Q). c.Market for good Y P: _______________ d. Q: _______________ 1.Demand a. The law of demand states there is a(n) ________________________relationship between the ________________ of X and the _________________________ of X, ceteris paribus Indicate whether the following change in economic circumstance, ceteris paribus, will increase, decrease, or have no effect on the demand for product X. b.____________Decrease in income, assume product X is a normal good c.____________ Decrease in the price of Y, products X and Y are substitutes d.____________Increase in the price of Z, products X and Z are complements e.____________Buyers expect the price of X to decrease in the near future f.____________Decrease in the price of X 2.Critical thinking using the lens of economics a.Children are inferior “goods.” Do you agree or disagree? Explain your answer. b.During the real estate boom between the early 2000s and 2007 the prices of homes rose year after year yet people purchased more homes year after year. A TV commentator recently said, “This economic event was an exception to the law of demand.” Do you agree or disagree? Explain your answer. 3.Indicate whether the following change in economic circumstance, ceteris paribus, will increase, decrease, or have no effect on the supply of product X. a.____________Increase in the price of resources used to produce product X b.____________Technological advance increases labor productivity c.____________Decrease in the number of firms producing product X d.____________Decrease in the number of people buying product X e.____________Decrease in the price of X 4.Congress increases the excise tax on a gallon of gasoline by $1.00. Given this change in economic circumstance, ceteris paribus, a.the demand for gasoline would ______________________________, b.the supply of gasoline would ______________________________. Use your answers to (a) and (b) to illustrate graphically what happens in the gasoline market. Predict the direction of change in equilibrium price (P) and quantity (Q). c.Market for gasoline P: _______________ d. Q: _______________ 5.Goods X and Y are complements in consumption. Higher production costs increase the price of good X. Given this change in economic circumstance, ceteris paribus, a.the demand for good Y would ______________________________, b.the supply of good Y would ______________________________. Use your answers to (a) and (b) to illustrate graphically what happens in the market for good Y. Predict the direction of change in equilibrium price (P) and quantity (Q). c.Market for good Y P: _______________ d. Q: _______________ 1.Demand a. The law of demand states there is a(n) ________________________relationship between the ________________ of X and the _________________________ of X, ceteris paribus Indicate whether the following change in economic circumstance, ceteris paribus, will increase, decrease, or have no effect on the demand for product X. b.____________Decrease in income, assume product X is a normal good c.____________ Decrease in the price of Y, products X and Y are substitutes d.____________Increase in the price of Z, products X and Z are complements e.____________Buyers expect the price of X to decrease in the near future f.____________Decrease in the price of X 2.Critical thinking using the lens of economics a.Children are inferior “goods.” Do you agree or disagree? Explain your answer. b.During the real estate boom between the early 2000s and 2007 the prices of homes rose year after year yet people purchased more homes year after year. A TV commentator recently said, “This economic event was an exception to the law of demand.” Do you agree or disagree? Explain your answer. 3.Indicate whether the following change in economic circumstance, ceteris paribus, will increase, decrease, or have no effect on the supply of product X. a.____________Increase in the price of resources used to produce product X b.____________Technological advance increases labor productivity c.____________Decrease in the number of firms producing product X d.____________Decrease in the number of people buying product X e.____________Decrease in the price of X 4.Congress increases the excise tax on a gallon of gasoline by $1.00. Given this change in economic circumstance, ceteris paribus, a.the demand for gasoline would ______________________________, b.the supply of gasoline would ______________________________. Use your answers to (a) and (b) to illustrate graphically what happens in the gasoline market. Predict the direction of change in equilibrium price (P) and quantity (Q). c.Market for gasoline P: _______________ d. Q: _______________ 5.Goods X and Y are complements in consumption. Higher production costs increase the price of good X. Given this change in economic circumstance, ceteris paribus, a.the demand for good Y would ______________________________, b.the supply of good Y would ______________________________. Use your answers to (a) and (b) to illustrate graphically what happens in the market for good Y. Predict the direction of change in equilibrium price (P) and quantity (Q). c.Market for good Y P: _______________ d. Q: _______________Explanation / Answer
1. A) The law of demand states there is an inverse relationship between the price of X and quantity demanded of X, ceteris Paribus.
B) If X is a normal good, a decrease in Income will decrease demand for product X, because income is a determinant of demand.
C) If products X and Y are substitute of each other i.e. one good can be used in place of the other, then a decrease in the price of Y will cause people to buy more of good Y and less of good X. Therefore, demand for product X will decrease.
D) If products X and Z are complements i.e. both are used together, then increase in the price of Z will cause people to buy less of good Z and so, demand for good X will also decrease.
E) If buyers expect price of good X to decrease in near future, they will buy more X in future when price will decrease and will buy less of the good now. Therefore, demand will decrease.
F) Decrease in price of X only increases the quantity demanded of good X. Price is not a determinant of demand, so price change will not affect demand for X. That is, demand curve will not shift but there will be a movement along the demand curve because of the price change.
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