Paragraph 15 14 12 0 2 4 68 10 12 14 16 Quantity of Chips Assume lines M, N and
ID: 1114143 • Letter: P
Question
Paragraph 15 14 12 0 2 4 68 10 12 14 16 Quantity of Chips Assume lines M, N and O are demand curves for chips. Assume that curve N is the initial relevant demand curve. Assume chips and popcorn are substitutes and normal goods. Assume chips and salsa are complements and normal goods. For the following questions the appropriate answers are: 0. move from curve N to O M. move from curve N to M U. move up and to the left along curve N D. move down and to the right along curve N 1. indeterminable with given information Circle O, M, U, D, or I for each question. In each case, assume you started somewhere on curve N for each question 1. If the price of chips decreases, you would represent it by OMUDI 2. If the price of chips increases, you would represent it by OMUDI 3. You would represent an increase in consumer income by OMUDI 4. You would represent effective advertising of salsa by O M U D 5. You would represent a decrease in price of salsa by O MUDI 6. You would represent a decrease in population in the area by OMUDI 7, You would represent news that chips consumption may be good for your health by O M U D 8. You would represent a decrease in the price of popcorn by O M UDI 9. You would represent a decrease in the supply of chips by O M UDI 10. You would represent an increase in the price of candy by OMUDL 0Explanation / Answer
1. If the price of chips decreases - D. It will be a movement along the demand curve (N). The quantity demanded will increase, as the price falls.
2. If the price of chips increases - U. It will be a movement along the demand curve (N). The quantity demanded will decrease, as the price falls.
3. O. Increase in consumer income will be a shift in the demand curve. As there is an increase in income, quantity demanded will increase and the demand curve will shift to the right.
4. O. Since salsa and chips are complements and the demand is a joint demand. If the demand for salsa goes up then demand for chips will also increase.
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