Macro 1 - Quiz 1 5. The Law of Demand states that if the...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Quiz 1 5. The Law of Demand states that if the price decreases, the quantity demanded in- creases. The variables of the Law of Demand are simply price and quantity. A con- sumer’s willingness to buy a good at a certain price is determined by the factors: tastes) desire for this good and others), income, other goods (their availability and price), expectations (for income, price, tastes), and number of buyers. A change in the quantity demanded is different from a change in demand because a change in the quantity demanded shifts along the demand curve due to a change in price so the consumer will demand less or more of the product depending on the price. A change in demand depends on the consumer’s variables such as a change in taste or the price of a complement or substitute. A change in demand could be because of any of the factors stated above. The graph will show you how with a change in price you shift along the demand curve depending on the price of the good. A change in any of the consumers factors of consumption will result in a change in demand where the whole curve will shift inward or outward due to the change in factors. 6. If supply increases but demand decreases, there could be three different outcomes depending on how drastic or little the increase in supply or decrease in demand is. If there is an equal increase in supply as there is a decrease in demand, both curves will shift the same amount and the price will decrease while the quantity stays the same. If there is a drastic decrease in demand while a little increase in supply, the price and quantity will drop. If there is a drastic increase in supply and a tiny de- crease in demand, the price will drop while the quantity stays increases. 7. A) The equilibrium price will decrease while the quantity increases due to the new technology used to milk the cow and hence higher production. B) The substitute will lose its demand because milk prices are falling. So, the price and quantity will decrease. C) Cereal will increase in demand because the demand for milk is increasing.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

Macro 1 - Quiz 1 5. The Law of Demand states that if the...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online