Problem Sets 2

The size of the right shift caused by AirPods is greater then the size of the left shift caused by Galaxy, so the demand for iPhone increased and shift to the right.

Consider the demand for iPhone. If the price of Samsung Galaxy declines and the price of AirPods declines, can you tell for sure what will happen to the demand for iPhone? Why?

1) increase 2) shift to the right 3) change in consumer preference Demand for minivans will increase because having children changes parents preference for cars, therefore shifting the demand curve to the right

According to CDC, around 3.66 million babies were born in 2021, representing a 1% increase from 2020." Consider the market for minivans. If people decide to have more children, what will happen to the demand curve of minivans? Why? 1)inc/dec 2)shift 3)why?

1)Expecting a decline in price 2)Demand decreases 3)Shift to the left Since consumers expect prices to drop, they will decrease their current demand for homes b/c they would rather buy a house after these 12 months for a lower price

According to the National Housing Survey , "for the first time in two years, US consumers expect home prices to fall over the next 12 months." How will this survey result affect the current home market demand? Why?

The size of the right shift caused by AirPods is less than the size of the left shift caused by Galaxy, so the demand for iPhone decreased and shift to the left.

Consider the demand for iPhone. If the price of Samsung Galaxy declines and the price of AirPods declines, can you tell for sure what will happen to the demand for iPhone? Why?

The flaw in reasoning is that a change in price does not cause a change in demand, but a change in quantity demanded. The increase in price causes a movement up the demand curve such that quantity demanded falls.

Consider the following statement: "An increase in the cost of oil will cause the price of a plane ticket to increase. This increase in price will cause a decrease in demand for airline travel and a leftward shift in the demand curve." a.The cost of oil affects supply and not demand so prices of tickets will remain the same. b.An increase in the price of a ticket will not cause a decrease in demand, but rather a decrease in quantity demanded. c.A decrease in demand will shift the curve rightward, not leftward. d.The increase in the cost of oil will cause a decrease in the price of a plane ticket.

a. Assuming coffee is a normal good, an increase in income will result in an increase in the demand for coffee. Thus, the demand curve would shift to the right. b. If consumer come to believe that coffee is unhealthy for them, consumer preferences will shift away from coffee. Thus, the quantity of coffee demanded at each price will decrease, reflected in a leftward-shifting demand curve. c. An increase in the price of coffee will cause consumers to purchase less coffee. As the demand curve shows the relationship between the price of coffee and the quantity of coffee demanded, the higher price will cause a movement up and to the left along the demand curve. d.The demand for Samsung's Galaxy smartphones will decrease following the news of batteries spontaneously combusting. Consumers will be willing to buy less Galaxy smartphones at every given price and the demand curve will shift to the left. e.The Samsung Galaxy smartphone and the iPhone are substitutes for most consumers. The demand for Galaxy smartphones will increase when iPhones become more expensive. f.The increase in the price of cars is illustrated as a movement up the demand curve. Remember, the demand curve represents the negative relationship between price and quantity demanded. So any change in price is a movement along the curve. Anything else that affects demand such as income, preferences, etc. will cause the quantity demanded to change at every price which is illustrated as a shift of the demand curve.

Draw graphs for each situation and explain: a. Average hourly wages increase in the U.S. b.The state of California requires all coffee houses to post warnings to consumers about the cancer-causing components of coffee. c.Coffee houses increase the price of coffee in order to pay their baristas more. d.The batteries in Samsung smartphones begin to spontaneously combust. e.Apple increases the price of the newest iPhone by 10%. f.The current administration imposes an unannounced tariff on steel imports which causes the price of new cars to increase overnight.

1) Income declines (change in income) 2) Need to consider whether this good is inferior or normal 3)Tends to be inferior 4) Demand increases 5) Shift to the right Increased unemployment rate will increase demand for frozen vegetables because frozen vegetables are an inferior good, so when income decreases, demand increases

Due to the Covid-19 pandemic, many people lost their job. "In the early months of the crisis, tens of millions of people lost their jobs." How will the increase of unemployment rate affect the demand of frozen vegetable? Why?

Gasoline and SUVs are complementary goods. SUVs require gasoline to operate. If the price of gasoline rises, the demand for SUVs will decrease because the two goods are consumed together. This will shift the demand curve to the left. Train travel and plane travel are substitute goods. If the price of airfare rises, demand for train travel will increase because it will be a relatively cheaper option. Therefore, the demand curve shifts to the right. Smartphones and Verizon data plans are complementary goods. Smartphones require data plans for full operation. If the price of data plans rise, the demand for smartphones will decrease because the two goods are consumed together. Therefore, the demand curve shifts to the left.

For each pair of goods, identify if the goods are substitutes or complements. Next, use a graph to illustrate how a change in the price of one good impacts the other good. a. In the market for gasoline and sport utility vehicles (SUVs), the two goods are__________(comp/sub) If the price of gasoline rises, what response do you expect in the market for SUVs? Shift the demand curve to show what happens in the market for SUVs when the price of gasoline rises. b. In the market for transportation, taking the train and taking a plane are______(comp/sub) If the price of airfare rises, what response do you expect in the market for train travel? Shift the demand curve to show what happens in the market for train travel when the price of airfare rises. c. In the market for smartphones and Verizon data plans, the two goods are____(comp/sub) If the price of data plans rise, what response do you expect in the market for smartphones? Shift the demand curve to show what happens in the market for smartphones when the price of data plans rise.

Samsung Galaxy is a substitute for iPhone. AirPods is a complement for iPhone. Samsung Galaxy price declining will cause the demand for iPhone decreasing. AirPods price declining will cause the demand for iPhone increasing. But we don't know the size of shifts! Cannot tell for sure what will happen to the demand for iPhone. You can't tell b/c you don't know how much each shifts the demand curve price of airpods decreases, demand increases for iphones price of samsung decreases, demand decreases for iphones

Starting with the 2020 iPhone 12 lineup, Apple phones no longer come with a charger or headphones in the box." Consider the demand for iPhone. If the price of Samsung Galaxy declines and the price of AirPods declines, can you tell for sure what will happen to the demand for iPhone? Why?

1. complmenets/inc The interdependence principle identifies price of related goods as one factor which can shift the demand curve for a good. Complementary goods are goods that go together. Substitute goods are goods that replace each other. The PS4 and PS+ subscriptions are consumed together, therefore they are complements in consumption. The lower price of the PS4 entices consumers to purchase a PS4, increasing the demand for PS+ subscriptions. Since Sony is the producer of both products, they are likely attempting to decrease the price of the one-time purchase of a PS4 to incentivize more people to sign up for the recurring purchase of the PS+ subscription. The revenue from recurring subscriptions to PS+ will likely exceed the loss from sales of the PS4.

When Sony released the PlayStation 4, it was reported that Sony was taking a loss of $60 on every PS4. However, Sony expected to make this up with sales of PS+ subscriptions and increased royalties from video games. Use the interdependence principle to help explain this strategy. The PS+ subscriptions allow PS4 owners to play their games online, receive new games monthly to download at no charge, and receive additional special discounts on other items. Therefore, the PS4 and PS+ subscriptions are __(comp/sub)____________ in consumption. Decreasing the price of the PS4 will (dec/inc) the demand for PS+ subscriptions. Sony expects that revenue from recurring PS+ subscriptions will be larger than the loss in revenue from PS4 sales.

b(shifts right)(inferior good)

Which of the following could cause a leftward shift of the demand curve? A) An rise in the price of substitute goods. B) An rise in income level of consumers. C) An increase in the number of consumers in the market. D) A decrease in the number of producers in the market. E) A decline in the price of complement goods.

Your individual willingness to pay increased for an Uber ride due to your positive experience. People's willingness to pay for items changes for many reasons. This may be classified as a change in preference such that you are now willing to pay more for each ride. If price goes up, you are still going to demand fewer Uber rides. For example, if the next time you want an Uber the price is $50 for the same ride, you will likely demand 0 rides at that price.

You just took an Uber from home to campus for the first time and were willing to pay $13 for the trip. It was so much easier than driving yourself that you are willing to pay $21 for the same trip tomorrow. Determine if you have violated the law of demand based on your choices, and why or why not that is the case a. do not violate the law of demand because your preference for the product changed after you experienced the good. b. do violate the law of demand because the law of demand states that quantity demanded decreases as price increases. c. do not violate the law of demand because the law of demand states that quantity demanded increases as price increases. d. do violate the law of demand because you have chosen to buy the same amount of the product at two different prices.

Nothing happens to the demand curve but the quantity demanded of milk decreases and prices increase.

n 2022, "dairy prices increased 11.8% year-over-year, with milk rising 15.9%."The price of milk rises, what happens to the demand for milk?