econ problem set 1

econ problem set 1 - Problem set #1 with answer key Please...

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Unformatted text preview: Problem set #1 with answer key Please practice it, you may benefit. 1. Ceteris Paribus CP , what happens to the demand for a product when the following changes occur? (This was your homework). a. The price of the good declines. b. Income increases and the good is normal. c. Income increases and the good is inferior. d. The price of a substitute good increases. e. The price of a substitute good decreases. f. The price of a complement good increases. g. The price of a complement good decreases. h. The price of the good is expected to increase in the future and the good is preserve able. i. The price of the good is expected to decrease and you cannot delay its consumption. ANSWER 1. a. CP, a change in the goods price results in a change in quantity demanded, therefore, there is no change in demand for the good. b. CP, for a normal good, an income increase leads to an increase in demand for the good. c. CP, for an inferior good an income increase leads to a decrease in demand for the good. d. CP, a price increase of the goods substitute leads to an increase in the demand for the good. e. CP, a price decrease of the goods substitute leads to a decrease in the demand for the good. f. CP, a price increase of the goods complements leads to a decrease in the demand for the good. g. CP, a price decrease of the goods complements leads to an increase in the demand for the good. 1 h. CP, a higher future price expectation for a durable good leads to an increase in demand for the good now. i. CP, the future price expectation for a basic necessity leave the present de- mand for the good unchanged....
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econ problem set 1 - Problem set #1 with answer key Please...

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