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Supply and Demand Question

Supply and Demand Question - 2 Determine which curve...

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HOW TO SOLVE A SUPPLY AND DEMAND QUESTION Car washes are a normal good and people’s incomes rise, what happens to the price and quantity of car washes? 4 step process to solve: 1- Draw supply & demand diagram and label everything 2- Determine which curve shifts 3- Determine the direction of the shift 4- Draw the new curve and read the answers Positive line = Supply line Negative line = Demand line
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The number of firms producing clothing increases, what happens to the price and quantity of clothing? Price goes down Quantity increases New technology for producing lipstick happens and at the same time, it becomes more stylish to wear more lipstick, what happens to the price and quantity of lipstick? 4 step process to solve a problem with 2 things that change 1- Draw 2 supply and demand diagrams & label everything
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Unformatted text preview: 2- Determine which curve shifts (Twice) 3- Determine the direction of the shift (Twice) 4- Draw a big demand shift and a small supply shift in one diagram, draw a small demand shift and a small big supply shift in another diagram 1 st problem ( New Technology) shifts the supply curve to the right 2 nd problem ( More Stylish ) Shifts the demand curve to the right Quantity increase, and price might rise, might fall, or might not change Suppose a hurricane is predicted to enter the Gulf of Mexico where many oil platforms are located. What happens now to the price and quantity of oil? Supply Left: Bad state of nature Expected future price rises: Changes demand and supply curve= Demand ^ (R); Supply v (L)...
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