Microeconomics 1: Changes in Demand & Supply / 2

CHANGES IN DEMAND AND SUPPLY

i) What factors cause a shift of the demand curve?

ii) What causes a movement along the demand curve?

iii) What factors cause a shift of the supply curve?

iv) What causes a movement along the supply curve?

When a factor causes only one curve to shift, we can definitely say whether or not quantity and price will increase or decrease.

When factor changes cause both curves to shift at the same time, the effect of these changes on one variable (either price or quantity) will be unclear, or ambiguous.

For the following events, explain how they affect demand and/or supply (do they shift? Which way?), as well as how they affect equilibrium price and quantity (do they increase, decrease, or is it unclear?). Draw a graph showing these changes.

Question 1

In the market for bread, household incomes increase, and the price of flour increases. (Suppose that bread is a normal good.)

Question 2

In the market for computers, advances in technology have improved the production process for computers, allowing firms to produce twice as many goods in the same amount of time.

Question 3

A study has found that consuming apples offers even more health benefits than previously realized.

Question 4

There is a large increase in the population, and technological advances simplify the process of producing cars.

Question 5

There is a large decrease in household incomes.

Question 6

Favourable weather over the previous year produced an unusually large harvest of wheat.

Question 7

A firm produces both apples and oranges using the same resources. Consumers consider these two goods to be substitutes. Suppose the price of oranges falls. Show the changes in the market for apples.

Question 8

The wages of workers in the market for pizzas increases.

Question 9

Consumers consider pens and paper to be complements. If the price of pens increases, show the effect on the market for paper.

Question 10

Many people are no longer interested in buying VHS tapes, and a large number of firms decide to stop producing these tapes.

To review your answers to these problems, book an appointment with our Econ/Comm/Bus. Subject Area Specialist at: https://alexander.mywconline.com/

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