econ 302 ass 3 - Christine Drews Toossi Section 2 Econ 302...

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Christine Drews Toossi Section 2 Econ 302 5/13/2009 Questions for Review 5. When the price of a good changes, it would result in a change in the quantity demanded, and we would have to move along the demand curve to show such a change. Also, if there is a shift of the supply curve, there is a change in the quantity demanded. However, a change in any other factor results in a change in the demand as a whole, shown by a shift of the whole demand curve. Therefore, the examples below result in a: a. Change in demand b. Change in quantity demand c. Change in quantity demand d. Change in demand 8. When determining the burden that a tax bears on the sellers and buyers of a market, we need to take note of the economic incidence, or the respective shares of the tax burden borne by the buyers and sellers. The share of tax that the buyers and sellers will end up paying, too, depends only on the shape of the supply and demand curves. The steeper the demand curve for a good relative to the supply curve for that good, the greater the proportion of a tax on that good that will fall on the buyers. So, to answer the question, if the government wants the burden of a product to fall mostly on the consumers, they should look for a good whose demand is more elastic than its supply, and then tax that good. Problems 1. a. The issuance of a price ceiling on the tea causes the supply of tea to increase, and the demand to go in excess of the supply. Since tea and lemons are complements, this means that they go hand-in-hand, as far as the buying trends. The decrease in price of tea set by the price ceiling causes the demand for the
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This note was uploaded on 04/07/2008 for the course ECON 302 taught by Professor Toossi during the Spring '08 term at University of Illinois at Urbana–Champaign.

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econ 302 ass 3 - Christine Drews Toossi Section 2 Econ 302...

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