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Unformatted text preview: ublic transportation to accommodate for change in gas prices. o Describe and explain the long term and short term elasticity of luxury goods (e.g. designer purses, clothing, cars) The elasticity of luxury goods is high on the short run and long run as people can fairly easily forgo luxury goods and adopt for cheaper substitutes—this is something we observe in recessions. o Technical problems For the following questions, use a diagram with supply and demand curves to explain the effects of the given shock on the equilibrium price and quantity (i.e. draw any shifts of the demand or supply curve and equilibrium). Explain whether there is a shift in the demand curve, supply curve or neither.1 o What happens to demand curve of VHS when DVDs are introduced? The demand curve of VHS shifts to the left when DVD is introduced as consumers will switch to using DVD; DVD and VHS are substitutes. Assuming the supply of VHS stays constant, the equilibrium price and quantity will decrease. o The Los Angeles Metro decides to...
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This note was uploaded on 11/07/2013 for the course ECON 11 taught by Professor Rosenthal during the Spring '10 term at Caltech.

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