causing the price and quantity supplied (t6o- Thinking About and Applying Market

Question

causing the price and quantity supplied (t6o- Thinking About and Applying Markets and the Market Process I. Changes in Demand Indicate whether there is an increase or decrease in demand, an increase or decrease in quantity demanded, or no effect on demand.(The market of interest is in italic) TV sets. The number of producers of TV sets decreases 2. Radios. The price of radios goes up. 3. Cassette recorders. The price of cassette recorders falls 4. Coffee. The price of tea falls. 1. II, Changes in Supply Indicaté whetber the supply cüirvé would shift to the left oxright in the ollowing situations, If there is ho effect, say s Right, 1, No Effect 1: Theilimber offródicers of theproduct decreases.* , 2. Consumers expect higher prices in the future 3. The price of the product goes up 4. The cost of an imput decreases 5. Consumers' incomes fail. 6. A change in technology reduces the costs of producing the product 7. A tariff is placed on the product. 8. The price of a substitute in productioni increases 9. A tax on the product is increased 10. The price of the product falls. Copyright OHoughton Mimi Company All rights reserved 6 9

Explanation / Answer

Question I

Changes in demand

1. TV sets - The number of producers of TV sets decreases.

Change in the number of producers impact the supply of a good but has no impact on the demand for good.

So, in this case, there would be no effect on demand of TV sets.

2. Radios - The price of radios goes up

Change in price impact the quantity demanded of a good.

Increase in price leads to decrease in quantity demanded while decrease in price leads to increase in quantity demanded.

Price of radios has increased.

So, in this case, there would be a decrease in quantity demanded of radios.

3. Cassettes recorders - The price of cassette recorder falls.

Increase in price leads to decrease in quantity demanded while decrease in price leads to increase in quantity demanded.

Price of cassette recorder has decreased.

So, in this case, there would be an increase in quantity demanded of cassette recorders.

4. Coffee - The price of tea falls

Tea and coffee are substitute goods.

In case of substitute goods, increase in price of one leads to increase in demand for other and decrease in price of other leads to decrease in demand for other.

The price of tea has decreased.

So, in this case, there would be decrease in demand for coffee.

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