Econ 2020-400 Worksheet 1 Key

Econ 2020-400 Worksheet 1 Key - Econ 2020-400 Principles of...

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Econ 2020-400 Principles of Macroeconomics Spring 2008 Recitation Worksheet 1 - Answer Key 1. Demand for Oceanic Airlines flights goes down and the demand curve shifts to the left. Supply stays the same (no shift in the supply curve). The point of this question was to address the difference between factors that affect quantity demanded and factors that affect demand. A “change in quantity demanded” is a movement along the demand curve and is only caused by a change in price - a shift in the demand curve is not a “change in quantity demanded” even though it may lead to a new equilibrium. Here demand is affected by a change in consumer preferences, i.e. consumers now likely view Oceanic Airlines flights as being less safe. Therefore, for any given price they will demand fewer flights. Assuming no supply effects in the short-term (Oceanic has enough planes to keep making flights, despite the fact that they lost one in the crash), the shift of the demand curve causes a decrease in price, which causes a decrease in quantity supplied. 2. The correct answer is C. As consumers become more fat-conscious, there will be a decrease in the
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This note was uploaded on 02/28/2008 for the course ECON 2020 taught by Professor Kaplan,jul during the Spring '08 term at Colorado.

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