Assignment Demand & Supply In each of the following scenarios decide if the prod

Question

Assignment Demand & Supply

In each of the following scenarios decide if the product is moving along the curve ( The price of diamonds has gone from $ 1,000 a karat to $ 2,000 a karat, this represents movement along the curve. Higher the price less of the demand.) OR If the product's determinants have shifted the curve. (flat screen TVs have become more popular (notice no mention of price). The demand curve has shifted to the right.)

If it helps you may want to think of product B as Butter or Baby dolls

What effect will each of the following have on the demand for product B?

A. Product B becomes more fashionable

B. The price subsitute product C Falls

C. Income declines and product B is an inferior good

D. Consumers anticipate that the price of B will be lower in the near futre.

E. The price of complementary product D falls

What effect will each of the following have on the supply of product B?

a. A technological advance in the methods producing product B.

b. A decline in the number of firms in industry B.

c. An increase in the prices of resources required in the production of B.

d. The expectation that the equilibrium price of B will be lower in the future than it is currently.

e. A decline in the price of product A, a good whose production requires substantially the same techniques and resources as does the production of B.

f. The levying of specific sales tax on B.

g. The granting of a 50-cent-per-unit subsidy for each unit of B produced.

.

Explanation / Answer

,ITS DEMAND WILL INCREASE THE DEMAND CURVE WILL SHIFT TO MTHE RIGHT

B. The price subsitute product C Falls

DEMAND WILL DECREASE AND THE DEMAND CURVE WILL SHIFT TO ITS LEFT.

C. Income declines and product B is an inferior good

IT IS DEMAND WILL INCREASE BECAUSE DEMAND CURVE WILL SHIFT TO ITS RIGHT

D. Consumers anticipate that the price of B will be lower in the near futre

.DEMAND MAY DECREASE BECAUSE PEOPLE MAY POSTPONE THEIR CONSUMPTION OF THE THING. SO DEMAND CURVE WILL SHIFT TO ITS LEFT.

E. The price of complementary product D falls

HERE THE DEMAND WILL INCREASE AND DEMAND CURVE WILL SHIFT TO ITS RIGHT

a.       A technological advance in the methods producing product B.

SUPPLY WILL INCREASE SO SUPLY CURVE SHIFT TO RIGHT

b.       A decline in the number of firms in industry B.

SUPPLY WILL DECREASE.SO SHIFT OF SUPPLY CURVE TO IS LEFT

c.        An increase in the prices of resources required in the production of B.

THIS WILL LEAD TO INCREASE IN THE COST OF PRODUCTION, THERE BY REDUCTION IN THE PROFIT HENCE SUPPLY DECREASES ,SUPPLY CURVE SHIFTS TO ITS LEFT

d.       The expectation that the equilibrium price of B will be lower in the future than it is currently.

INCREASE IN SUPPLY, PRODUCERS WILL TRY TO CLEAR THE PRODUCE AT PRESENT PRICE. SO SUPPLY CURVE SHIFTS TO IS RIGHT

e.        A decline in the price of product A, a good whose production requires substantially the same techniques and resources as does the production ofB.

ITS SUPPLY WILL INCREASE HENCE SHIFT OF SUPPLY CURVE TO ITS RIGHT

f. The levying of specific sales tax on B.

g. The granting of a 50-cent-per-unit subsidy for each unit of B produced.

.

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