Prit Patel Assign 2(C).docx

Prit Patel Assign 2(C).docx - ECON 120 Assignment 2(C SHORT...

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ECON 120 Assignment 2 (C) SHORT ANSWER 1. Suppose that the equilibrium price in a market is $10, but the existing market price is $8. What will happen in the market? What if the existing market price is $15? (2 marks) Since the existing market price is below the equilibrium price, there is going to be a shortage of the good, and the market price will rise until it reaches the equilibrium price. If the existing price was to be $15, it will be above the equilibrium price and therefore the market price will drop until it reaches the equilibrium price. 2. For each of the following situations in the wheat market, determine whether the quantity demanded changes, or the demand curve shifts, and show the direction of the change in each diagram. (5 marks) D 1 a) Consumer income increases b) The price of wheat increases Demand curve shifts rightwards Causes a decrease in demand, no curve shift D 1 D 1 c) Science determines that eating wheat d) The price of oats increases causes high blood pressure
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