HW+2+answer+key (1)

HW+2+answer+key (1) - bought and sold of corn. 5. When...

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Answer Key: HW 2 1. A change in quantity demanded occurs when the price of that good changes and is reflected by a movement along (sliding up and down) the demand curve. A change in demand occurs when any factor that affects demand EXCEPT price of that good changes. This is shown by a shift to the right or left of the demand curve. 2. When price of green beans a substitute for broccoli decreases, demand for broccoli will decrease. This will cause the demand curve for broccoli to shift to the left and will result in a decrease in the equilibrium price and quantity of broccoli. 3. Some of the factors that influence supply of a product include, state of technology, number of sellers, price of inputs and future expectations. 4. Due to good weather in Midwest, supply of corn will increase and this will result in a fall in equilibrium price of corn and an increase in quantity
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Unformatted text preview: bought and sold of corn. 5. When energy prices increase it causes price of steel an input in car production to increase as well. This results in an increase in the cost of making cars, thereby the supply curve for cars shifts to the left (decreases). The new price of cars will be higher and quantity lower compared to the old equilibrium. 6. d. a decrease in income 7. Price ceilings are legal maximum prices. Eg, housing rent controls. Price floors are legal minimum prices. Eg. Minimum wages. 8. The law of demand states that there exists an inverse relationship between price and quantity demanded of the product, ceteris paribus. 9. If broccoli and cheese are complements, and price of cheese decreases, then equilibrium price and quantity of broccoli will go up....
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