Chapter 3 Demand, Supply, and Market Equilibrium

Chapter 3 Demand, Supply, and Market Equilibrium - Chapter...

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Chapter 3 - Demand, Supply, and Market Equilibrium Changes in Demand and Supply 1. Consider XBOX 360s and XBOX 360 games. Suppose the price of XBOX 360s fell. What can we infer about XBOX 360 games? Answer: the demand curve for 360 games will shift to the right XBOX 360s and their games are complementary goods. If the price of one falls the demand for the other increases. See the graphs below. 2. Suppose you consume Ramen noodles and box macaroni and cheese. When you graduate college you get a job and make more money. Your consumption then falls for these two goods. What does this suggest about Ramen noodles and box macaroni and cheese? Answer: These two goods are inferior. If income increases and the demand for a good decrease then you have an inferior good.
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3. As the baby boom ended, fewer families had young children. What would this mean about preschool services? Answer: the demand for preschool services fell (shifted to the left) With fewer children, that indicates a decrease in the population, which results in a lower demand for preschool services. The first thing to notice is a leftward shift in the demand curve. This causes a surplus in the market for preschool services at the previous equilibrium price. As a result, preschools had to
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Chapter 3 Demand, Supply, and Market Equilibrium - Chapter...

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