hw ch 3 1-16

hw ch 3 1-16 - TA: Ergin Bayrak ECON 203 September 9, 2005...

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TA: Ergin Bayrak ECON 203 September 9, 2005 Chapter 3 Homework #1-16 1. The Law of Demand is a fundamental characteristic of demand behavior. Other things equal, as price increases, the corresponding quantity demanded falls and visa versa. There is an inverse relationship between price and quantity demanded. The demand curve is downward sloping because of the law of demand—people buy more of a produce, service, or resource as its price falls. The determinants of demand include tastes, number of buyers, income, prices of related goods, and expectations. A favorable change in consumer tastes, an increase in the number of buyers, rise in income, increase in the price of a substitute good or decrease in the price of a complementary good, and consumer expectation of higher prices or incomes in the future cause an increase in the demand curve. The opposites of the above listed would cause a decrease in the demand curve. A change in demand is a shift in the demand curve and a change in the quantity demanded is a movement along the demand curve from one point to another; it is caused by a price change. 2. a. Produce B becomes more fashionable: Increase in demand b. The price of substitute product C falls: Decrease in demand. c. Income declines and product B is an inferior good: Increase in demand. d. Consumers anticipate that the price of B will be lower in the near future: Decrease in demand . e. The price of complementary good D falls: Increase in demand. 3. a. Airline tickets: Decrease in demand. b. Gasoline: Increase in demand. c. Hotel rooms: Decrease in Demand. d. American flags: Increase in demand. e. Books about Afghanistan: Increase in demand. f. Arabic interpreters: Increase in demand. 4. The law of supply states that as price increases, the quantity supplied increases and visa versa. Producers will produce and sell more of their product at a high price than at a low price. There is a direct relationship between price and quantity supplied. This direct relationship shows an upward sloping supply curve. There are six basic determinants of
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This note was uploaded on 10/28/2007 for the course ECON 203 taught by Professor Al-sabea during the Fall '05 term at USC.

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hw ch 3 1-16 - TA: Ergin Bayrak ECON 203 September 9, 2005...

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