chapter 4

identify which of the determinants of demand or supply are affected. Also indicate whether demand or supply increases or decreases. ( people decide to have more children )

demand curve shifts t0 the right and both price and quantity increase

identify which of the determinants of demand or supply are affected. Also indicate whether demand or supply increases or decreases. ( a stock market crash lowers people's wealth. )

demand shifts to left, price and quantity will fall

identify which of the determinants of demand or supply are affected. Also indicate whether demand or supply increases or decreases. ( A strike by steelworkers raises steel prices )

the supply will shift to the left and price increases and quantity decreases

b. The price of leather jackets falls.

A fall in the price of leather jackets will lead more people to buy later jackets, a substitute for sweaters. An increase in the amount sold of substitute goods sold reduces demand for sweatshirts. This reduction in demand shifts the demand curve to the right lowering both prices and quantity demanded for sweatshirts.

Because bagels and cream cheese are often eaten together, they are complements. We observe that both the equilibrium price of cream cheese and the equilibrium quantity of bagels have risen. What could be responsible for this pattern-a fall in the price of flour or a fall in the price of milk? Illustrate and explain your answer.

An increase in the price of flour. A fall in the price of milk. An increase in the price of milk. A fall in the price of flour. A decrease in the price of muffins, a close substitute for bagels

d. New knitting machines are invented.

New knitting machines will increase productivity and thus lower costs of production and increasing the supply of sweaters. This pushes the supply curve to the right which will raise quantity and raise prices.

c. All colleges require morning exercise in appropriate attire.

Required use of sweatshirts will increase the demand for sweatshirts, pushing the demand curve to the right raising quantity as well as price.

Using supply-and-demand diagrams, show the effect of the following events on the market for sweatshirts. a. A hurricane in South Carolina damages the cotton crop.

When a hurricane damages cotton crops it increases input prices which causes supply to fall, moving the supply curve to the right, lowering quantity demanded, and increasing price.

identify which of the determinants of demand or supply are affected. Also indicate whether demand or supply increases or decreases. ( engineers develop new automated machinery for the production of minivans )

supply shifts right, price decreased and quantity increases

identify which of the determinants of demand or supply are affected. Also indicate whether demand or supply increases or decreases. ( The price of sports utility vehicles rises. )

the market for minivan will shift to the right demand shifts right and price and quantity increase