Week 04, Day 4 - Assignment 2 Solutions

Week 04, Day 4 - Assignment 2 Solutions - ASSIGNMENT #2...

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ASSIGNMENT #2 SOLUTIONS 1. a) A breakthrough in solar panel production methods decreases the cost of producing solar panels. As a result, the supply of solar panels increases. See Graph 1. b) Corn is used to feed pigs. Higher corn prices raise the cost of producing pork and lower the supply of pork. See Graph 2. c) When less housing is constructed, builders need less lumber. The demand for lumber decreases. See Graph 3. d) Pubic transit and used cars are substitutes in consumption. An increase in price of public transit encourages some transit users to switch to driving and the demand for used cars increases. See Graph 4. e) The new information about the health benefits of blueberries changes the tastes of buyers and increases the demand for blueberries. The increase in the number of farms leads to a higher supply of blueberries. Without knowing the magnitude of the increase in demand relative to the increase in supply, we cannot determine the change in the equilibrium price. There are three possibilities. See Graphs 5, 6, and 7.
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This note was uploaded on 10/13/2009 for the course ECON 1221 taught by Professor Whitaker during the Winter '09 term at Langara.

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Week 04, Day 4 - Assignment 2 Solutions - ASSIGNMENT #2...

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