Quiz 1 - a) Consumer income rises. Illustrate what will...

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Econ 302 Quiz 1 McLeod 1. (6 points) For each of the following questions, please answer with either “ increase ”, decrease ”, or “ remain unchanged ”. Only one of these answers is correct in each case. Suppose guitars and guitar strings are complements. If the price of guitars increases, what will happen to the a) demand for guitars? “Unchanged” b) the quantity demanded of guitars? “Decrease” c) the demand for guitar strings? “Decrease” 2. (5 points) Carefully explain the difference between a change in supply and a change in quantity supplied. A change in Q D is a movement along a demand curve. It is caused by a change in the price of the good. A change in Demand is a shift of the demand curve. It is caused by a change in something other than price. 2. (9 points) For each of the following situations, use a graph to illustrate the change that will occur in the market. Be sure to label your graph carefully.
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Unformatted text preview: a) Consumer income rises. Illustrate what will happen in the market for tuna fish, assuming tuna fish is an inferior good. Your graph should indicate a leftward shift of the demand curve. It should also be clearly labeled with Price on the vertical axis, and Quantity on the horizontal axis. b) A new technology decreases the cost of producing computers. Illustrate what will happen in the market for computers. Your graph should indicate a rightward shift of the supply curve. It should also be clearly labeled with Price on the vertical axis, and Quantity on the horizontal axis. c) The government increases the tax on consumers of tobacco. Illustrate what will happen in the market for tobacco. Your graph should indicate a leftward shift of the demand curve. It should also be clearly labeled with Price on the vertical axis, and Quantity on the horizontal axis....
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This note was uploaded on 12/18/2008 for the course ECON 302 taught by Professor Kurrejamesantho during the Fall '08 term at Pennsylvania State University, University Park.

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Quiz 1 - a) Consumer income rises. Illustrate what will...

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