NAME PRINT LAST NAME, FIRST NAME SECTION DEMAND AND SUPPLY e the demand for RC C

Question

NAME PRINT LAST NAME, FIRST NAME SECTION DEMAND AND SUPPLY e the demand for RC Cola increases following a decrease in income, then: the law of demand does not apply to RC Cola. RC Cola is an example of an inferior good b, d. RC Cola and Pepsi are complementary goods 2 According to the model of demand and supply, a decrease in the supply of cell phones is most likely to have been caused by an increase in the price of a cell phone. a. b. a decrease in the price of a cell phone c. an improvement in the technology used to produce cell phones. d. an increase in the cost of manufacturing cell phones. Which of the following would best explain an increase in the demand for jeans? a. b. c. d. 3. A decrease in income, assuming jeans are normal goods A decrease in the popularity of jeans An increase in the number of schools that allow students to wear jeans A decrease in the price of jeans Which of the following would be expected to increase the supply of copy machines? a. A decrease in the number of firms manufacturing copy machines b. A decrease in the price of copy machines 4. A decrease in the price of copy paper A decrease in the cost of manufacturing copy machines c. d. 5. A decrease in the demand for oranges with no change in supply will result in a(n) in the equilibrium price and a(n)in the equilibrium quantity a. increase: increase b. increase; decrease c. decrease; increase d. decrease; decrease Ceteris paribus, a decrease in the supply of grape juice combined with an increase in the demand for grape juice causes the equilibrium price of grape juice to: a. fall, but the effect on equilibrium quantity cannot be determined from the 6. information given. b. fall with no change in the equilibrium quantity. rise, but the effect on equilibrium quantity cannot be determined from the information given. c. d. rise with no change in the equilibrium quantity

Explanation / Answer

Question 1

If demand for a good increases with increase in income and decreases with decrease in income then good is said to be a normal good.

On the other hand, if demand for a good increases with decrease in income and decreases with increase in income then good is said to be an inferior good.

The demand for RC Cola has increased following a decrease in income. Therefore, RC Cola is an inferior good.

Hence, the correct answer is the option (c).

Question 2

Decrease in supply of a good happens due to the following factors -

1. Increase in input cost or cost of production

2. Degradation of technology

3. Increase in price of other goods

4. Decrease in number of sellers

5 Increase in taxes

So, a decrease in supply of cell phones is most likely to have been caused by an increase in the cost of manufacturing cell phones.

Hence, the correct answer is the option (d).

Question 3

Demand for a good increases due to the following factors -

1. Increase in income

2. Increase in the price of substitute good

3. Decrease in the price of complementary good.

4. Favorable change in taste

5. Increase in number of consumers

So, an increase in demand for jeans is due to an increase in the number of schools that allow students to wear jeans.

Hence, the correct answer is the option (c).

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