Refer to the information below in answering the next 6 questions. 1. Both supply

Question

Refer to the information below in answering the next 6 questions. 1. Both supply and demand increase. 5. Demand increases 2.Both supply and demand decrease. 6. Demand decreases 3. Supply increases and demand decreases. 7. Supply increases 4.Supply decreases and demand increases. S. Supply decreases 16. Which of the above situations will cause price to increase and quantity to decrease? 17. Which of the above situations will cause price to decrease and quantity to decrease? a. 3 b.2 c.6 d.8 18. Which of the above situations will cause price to increase and quantity to increase? a, 4 b, 1 c-2 d.5 19. Which of the above situations will cause price to decrease and quantity to increase? 20. In which of the above situations is the price change certain and the quantity change indeterminate? a. 1 b.6 c7 d.2&5 e.3&4 21. in which of the above situstions is the price change indeterminate and the quantity chane certain? 22. Which of the following scenarios is consistent with a price change for a normal good? a. The substitution effect is +2 and the income effect is -2 b. The substitution effect is +2 and the income effect is 1. c. The substitution effect is 2 and the income effect is 2 d. The substitution effect is -2 and the income effect is +1 e none of the above

Explanation / Answer

16. C8 (when supply falls at same demand price rise)

17. c6 ( when demand falls at same supply both price and quantity falls)

18.d5 ( when demand rises at same supply both price and quantity rises)

19.e7 ( when supply rises at same demand price falls and quantity rises)

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