Chapter3, problem 3, [(3.2)]
Place the following goods and services into pairs of likely substitutes and into pairs of likely
complements. (You may use an item in more than one pair.) The goods and services are:
coal, oil, natural gas, wheat, corn, rye, pasta, pizza, sausage, skateboard, roller blades, video
game, laptop, iPod, cell phone, text message, email, phone call, voice mail
Substitutes include: coal and oil; coal and natural gas; oil and natural gas; wheat and corn; wheat and
rye; corn and rye; pasta and pizza; pasta and sausage; pizza and sausage (they type of sausage that
cannot be used as a topping on pizza); skateboard and roller blades; skateboard and video game; roller
blades and video game; text message and email; text message and phone call; and, email and phone
Complements include: pizza and sausage (the type of sausage that can be used as a topping on pizza);
skateboard and iPod; roller blades and iPod; video game (the type played on a computer) and laptop;
cell phone and text message; cell phone and phone call; cell phone and voice mail; and, phone call and
B. Chapter3, problem 5, [(3.2)]
In January 2007, the price of gasoline was $2.38 a gallon. By May 2008, the price had increased to
$3.84 a gallon. Assume that there were no changes in average income, population, or any other
influence on buying plans. How would you expect the rise in the price of gasoline to affect
The demand for gasoline? Explain your answer.
The rise in the price of gasoline does not change the demand for gasoline. The demand for gasoline
changes only when some other relevant factor other than the price of the good changes.
The quantity of gasoline demanded? Explain your answer.
The rise in the price of gasoline decreases the quantity of gasoline demanded. A rise in the price of a
good or service decreases the quantity of that good or service demanded.
C. Chapter3, problem 7 [(3.3)]
American to cut flights, charge for luggage
American Airlines announced yesterday that it will begin charging passengers $15 for their first
piece of checked luggage, in addition to raising other fees and cutting domestic flights as it grapples
with record-high fuel prices.
Boston Herald, May 22, 2008
How does this news clip illustrate a change in supply? Explain your answer.
Fuel prices are a cost of a factor of production. As the cost rises, the supply decreases. American