Chapter 3: Problems |
2. Use your knowledge of demand to answer each of the following. a. How would a freeze in Florida affect the demand for oranges? b. The price of coffee falls. How is the demand for coffee affected? c. Income falls. How will this affect the demand for beans, an inferior good? d. How will a fall in the-price of peanut butter affect the demand for jelly? e. The media reports that red apples are sprayed with a substance
that allegedly causes cancer. What would be the likely effect of this news on the demand for apples? f. How would a major East Coast hurricane affect the demand and supply of lumber in the affected area?a. A freeze in Florida would cause a decrease in the supply of oranges. This decrease in supply would lead to an increase in the price of oranges, and hence an increase in the price of orange juice. As the price of orange juice rises, there will be a decrease in quantity
demanded. b. As the price of coffee falls, there will be an increase in quantity demanded. 3. Briefly describe the difference between a change in quantity supplied and a change in supply. What will cause each of these changes to occur? |
The price of peanuts increases. At the same time, we see the price of Jelly rise. How does this affect the market for peanut butter? A. the demand curve will shift to the left; the supply curve will shift to the left. B. the demand curve will shift to the left; the supply curve will shift to the right. C. the demand curve will shift to the right; the supply curve will shift to the left. D. the demand curve will shift to the right; the supply curve will shift to the right. I understand that the supply curve shifts to the left, but how does the demand curve shift to the right considering the price of its complement product (Jelly) increased? I've learned that the increase in the price of a complement product makes demand decrease. Could you please explain why the answer is C.?
increase in the price of peanut butter will cause the demand curve for jelly to shift to theleft, since as fewer units of peanut butter are demanded due to the higher price of peanutbutter, fewer units of jelly will also be demanded at any given price for jelly.8.Answer a.Since ham and turkey are substitutes, when the price of ham decreases, thiscauses the quantity of ham demanded to increase. As more units of ham are demanded,fewer units of turkey are demanded at every price. The demand for turkey therefore shiftsto the left.9.Answer a.As the price of good Y increases, this results in a decrease in the quantitydemanded of good Y. Since the demand for good X decreases, this implies that good Yand good X are consumed together; thus good X and good Y are complements.10.Answer b.As the price of good Y decreases, this results in an increase in the quantitydemanded of good Y. Since the demand for good X increases when the quantity demand-ed of good Y decreases, this implies that good X is a substitute for good Y.11.Answer a.When Jon’s income increases, the quantity of good X he demands at anygiven price falls, which implies that good X is an inferior good.12.Answer b.Both Jon’s income and the quantity of steak he demands increases; thereforesteak is a normal good.13. Answer a.An increase in population shifts the demand curve to the right, as theincrease in population implies a larger number of consumers of the product.14.Answer c.An increase in the number of buyers causes the quantity demanded of thegood to increase at every price, and the demand curve shifts to the right.15. Answer d.To find the market demand curve, hold price constant and then add thequantity of the good demanded by each of the consumers. Thus, if the price of the goodis $10, then the total of Peter’s, Anya’s, and Pablo’s demand must add up to 100 unitsaccording to the table provided in the question.16.Answer b.This question is asking you to recall that a change in the price of the good, hold-ing everything else constant, results in a movement along the curve. This movement alongthe curve causes a change in the quantity supplied and not a change in the supply curve.17.Answer a.Ground beef is an input in the production of Fast Wally’s hamburgers. Whenground beef gets more expensive, this increases the cost of producing hamburgers, whichcauses the supply curve to shift to the left.18.Answer b.When the cost of raw materials decreases, more batteries can be produced atany given price. This decrease in the cost of raw materials causes the supply curve for bat-teries to shift to the right.19.Answer a.When input prices decrease, producers are willing to supply more units of thegood at every price.20.Answer b.Since an increase in the production of one of the goods results in a decreasein the production of the other good, these two goods must be substitutes in production.