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Principles of Microeconomics + DiscoverEcon code card

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Answers to Problems 1a. Substitutes b. Complements c. Probably substitutes for most people, but complements for some others who like to eat ice cream and chocolate together. d. Substitutes. 2. The supply curve would shift: a. Right. The discovery is a technological improvement. The improved technique would enable more crops to be produced with the same inputs. b. Right. Fertilizer is an input. Lower input prices shift the supply curve to the right. c. Right. The new tax breaks make farming relatively more profitable than before. Thus those who were employed in a job that was just a little better than being a farmer would switch to farming. d. Left. Tornadoes destroy corn. 3a. Demand shifts right: income has risen and vacations are a normal good. b. Demand shifts right: preferences have shifted from hamburger to pizza and other substitutes. c. Demand shifts right: the price of a substitute has risen. d. Demand is unaffected; there will be a movement along the curve—i.e., quantity demanded will fall. 4. The demand for binoculars might increase, leading to an increase in the quantity of binoculars supplied, but no change in the supply of binoculars should occur.
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