# EOC 3 Solutions - modern principles of economics 3 modern...

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S-1 MODERNPRINCIPLES : MACROECONOMICS 33 MODERNPRINCIPLESOFECONOMICSFacts and Tools 1.When the price of a good increases the quantity demanded ____. When the price of a good decreases the quantity demanded ____. 1.When the price of a good increases the quantity demanded falls. When the price of a good decreases the quantity demanded rises. 2.When will people search harder for substitutes for oil: When the price of oil is high or when the price of oil is low? 2.When the price of oil is high, people will search harder for substitutes. 3.Your roommate just bought a Nike+ Sportwatch for \$160. She would have been willing to pay \$250 for a device that could improve her morning runs by measuring the speed, distance, and duration of the runs, and calculating the calories she burns. How much consumer surplus does your roommate enjoy from the Nike+ Sport- watch? 3.Roommate enjoys \$90 of consumer surplus from the Nike+ Sportwatch (willing- ness to pay minus price you actually paid equals consumer surplus: \$250 − \$160 = \$90). 4.What are three things that you’ll buy less of once you graduate from college and get a good job? What kinds of goods are these called? 4.There are many possible answers, including ramen noodles, macaroni and cheese, clothes from discount stores, low-quality used cars, and bus tickets. These are called “inferior goods.” 5.When the price of MacBooks goes down, what probably happens to the computers? 5.The demand for laptops featuring Microsoft Windows probably falls—remember that this means the entire demand curve shifts down/to the left. The demand for laptops featuring Microsoft Windows falls when the price of MacBooks goes down because laptops featuring Microsoft Windows and MacBooks are substitutes. Thus, when the price of MacBooks goes down, people switch to buying more MacBooks and fewer laptops featuring Microsoft Windows at any particular price. 6. a.When the price of olive oil goes up, what probably happens to the demand for corn oil? b.When the price of petroleum goes up, what probably happens to the demand for natural gas? To the demand for coal? To the demand for solar power? Solution Solution Solution Solution Solution Supply and Demand Cowen3e_CH03_Solutions.indd126/06/158:13 PM
S-2CHAPTER 3 Supply and Demand 6. a.The demand for corn oil probably goes up—remember that this means the entire demand curve shifts up/to the right, the demand for corn oil rises when the price of olive oil goes up because olive oil and corn oil are substitutes. b.When the price of petroleum goes up, the demand for these substitutes also goes up.

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