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ECN(15).pdf - 8 Demand shifters Aa Aa E1 The following...

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Unformatted text preview: 8. Demand shifters Aa Aa E1] The following graph shows the market demand for avocados. Suppose that a recent medical study suggests that eating avocados increases life expectancy. Show the impact of the medical study by shifting the demand curve on the graph. Tool tip: Click and drag the curve. The curve will snap into position, so if you try to move the curve and it snaps back to its original position, just try again and drag it a little farther. Answer PRICE [Dollars per crate] PRICE [Dollars per crate] QUANTITY DEMANDED [Crates of avocados] QUANTITY DEMANDED [Crates of avocados] Explanation: Close A Medical studies influence people's preferences. If people believe that the consumption of a particular good will improve their health, they will demand more of the product at any given price. A medical report linking avocados to longevity will cause the demand curve for avocados to shift to the right, since people will purchase more avocados at any given price. The following graph shows the market demand for mobile phones, which are normal goods. Suppose that a strong economic expansion causes consumer income to increase. Show the impact of the increase in income by shifting the demand curve on the graph. Answer PRICE [Dollars per mobile phone] D QUANTITY DEMANDED [Mobile phones] PRICE [Dollars per mobile phone] D QUANTITY DEMANDED [Mobile phones] Explanation: Close A There is a positive relationship between the demand for normal goods and consumer income. Since mobile phones are normal goods, an increase in income causes the demand curve for mobile phones to shift to the right. At the higher income levels, the quantity of mobile phones demanded is larger at any given price. The following graph shows the market demand for tortilla chips. Suppose that the price of salsa, a complement for tortilla chips, decreases. Show the impact of the decrease in the price of salsa by shifting the demand curve on the graph. Answer PRICE [Dollars per bag] PRICE [Dollars per bag] DD QUANTITY DEMANDED [Bags of tortilla chips] QUANTITY DEMANDED [Bags of tortilla chips] Explanation: Close A Salsa is a complement for tortilla chips. If the price of salsa decreases, the quantity of salsa demanded will rise and people will want to pair their additional purchases of salsa with additional purchases of tortilla chips. The demand curve for tortilla chips will shift to the right. ...
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