Hi can you help me with this assinment 1. What causes demand to increase? For ea

Question

Hi can you help me with this assinment

1.       What causes demand to increase? For each determinant listed, indicate what change in the determinant would cause a decrease in demand for Jeans. (e.g. TASTE CHANGE example: Jeans become less popular which decreases demand).

Number of buyers

Price of a substitute

Wealth

2.       What causes supply to increase? For each determinant listed, indicate what change in the determinant would cause an increase in supply of gasoline (e.g. TECHNOLOGY CHANGE example: better detection equipment increases productivity and supply of oil which is used to make gasoline.)

number of suppliers

resource prices

business taxes

3.       What does the Law of Demand say about buyers?

4.       Explain why the demand curve is downward sloping. Be sure to discuss the income and substitution effects.

5.       What effect do higher taxes for businesses have on supply? What does that do to the market prices and quantities? What effect do higher taxes for households have on demand? What does that do to the market prices and quantities? What definitely goes down, price or quantity?

6.       Give a definition and your own example of the following: 1. Normal good 2. Inferior good 3. Substitute goods 4. Complementary goods.

Explanation / Answer

1- No. of buyers- If there is less no. of buyers in the market, then the demand for jeans decreases.

Price of substitute- If the price of substitute decreases,then the demand for substitute goods increases leading to decrease in the demand of jeans.

Wealth- If the consumer's wealth cannot afford to buy jeans, then there is a decrease in demand.

2- No. of suppliers- If the number of suppliers increases, the supply of gasoline also increases

Resources prices- If the resource price increases,the supplier will find it more profitable and hence the supply of gasoline increases.

Business tax- If the business tax increases, the supplier will add it and will charge it from customer, so it will increase the supply of gasoline.

3- Law of demand states that keeping other factor constant,there exist an inverse relation between price and demand.

Law of demand tell about the buyer is that if the price decreases of any product new buyers will enter into the market to purchase the product,thus this will lead to increase in demand and vice versa.

4- The demand curve is sloping downwards due to the inverse relation between price and demand.

Income Effect- When the price of the commodity reduces,keeping monetary income constant,the purchasing power of the consumer increases and vice versa.

Substitution Effect- When the price of commodity reduces people find its substitute to be expensive even if the price of substitute doesnt increase and vice versa.

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