problemset_chpt3-1 - PROBLEM SET FOR CHAPTER 3 I(Demand...

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PROBLEM SET FOR CHAPTER 3 – I (Demand, Supply and Market Equilibrium) Problems 1) Do you agree or disagree with each of the following statements? Briefly explain your answers and illustrate with supply and demand curves. a) The price of a good rises, causing the demand for another good to fall. The two therefore substitutes. b) During 2003, incomes rose sharply for most Americans. This change would likely lead to an increase in the prices of both normal and inferior goods. c) Two normal goods cannot be substitutes for each other. 2) For each of the following, draw a diagram that illustrates the likely effect on demand or supply of eggs. a) A surgeon general warns that high-cholesterol foods cause hearth attacks. b) The price of bacon, a complemantary product, decreases. c) An increase in the price of chicken feed occurs. d) Caesar salads become trendy at dinner parties. (The dressing is made with raw eggs.) e) A technological innovation reduces egg breakage during packing.
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