101Solutions_2_DDSS1_

101Solutions_2_DDSS1_ - Solutions to Study Questions #2 -...

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Solutions to Study Questions #2 - The Market Model: Demand and Supply 6 D X 1 Economics 101 - Solutions to Study Question #2 E. Lau PART A - Short Answers 1. i) The main determinants of the market demand for commodity X are: a) price: in general, if the price of good X increases, the quantity of good X demanded will fall, and vice versa. b) income: if commodity X is a normal good, the quantity demanded will increase as income increases. If commodity X is an inferior good, the quantity demanded will fall as income increases. c) prices of related goods: if the price of substitutes for commodity X increases , the quantity demanded of commodity X will increase. If the price of complements of commodity X increases, the quantity demanded of commodity X will fall. For the purpose of constructing a demand curve, only changes in the price of commodity X and the corresponding change in quantity demanded are considered. ii) The main determinants of the market supply for commodity X are: a) price: the higher the price of commodity X, the greater the quantity supplied and vice versa. b) price of inputs: if the price of inputs into the production of commodity X increase, the quantity supplied will fall and vice versa. c)
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This note was uploaded on 12/16/2010 for the course ECON 101 taught by Professor Vanderwaal during the Fall '08 term at Waterloo.

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101Solutions_2_DDSS1_ - Solutions to Study Questions #2 -...

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