Answers to practice problems from Chapter 2 ECO550

Answers to practice problems from Chapter 2 ECO550 -...

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Answers to practice problems from Chapter 2 1 a. Since computers are a normal good, an increase in income will shift the demand curve to the right, i.e. we anticipate “an increase in demand” b. An increase in the price of computers will push us up along a given demand curve, reducing the quantity demanded c. Internet service and computers are complements. An increase in the price of Internet service, therefore, will reduce the demand for computers. The demand curve for computers will shift to the left. d. Semiconductors are a component used to manufacture computers. A decrease in the price of semiconductors will reduce production costs, and therefore shift supply to the right. This is an “increase in supply.” e. If consumers expect prices to fall, they will postpone their purchases. In this case, the demand curve to computers today will shift to the left, but the demand for computers in the near future will actually shift to the right. Note that both demand and supply have a time dimension that we
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Answers to practice problems from Chapter 2 ECO550 -...

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