Ch 3 Econ
The findings of Nagaraj and Reimer show that digital and print copies of books are
complements because the decrease in the price of digital books to zero is causing an increase in the quantity demanded for print copies of the same book.
Goods and services that can be used for the same purpose are ________, and goods and services that are used together are ________.
substitutes; complements
a. Can we conclude from this information that the demand curve for visiting the Met is upward sloping?
No, it is much more likely that during 2018 there was an increase in demand for visits to the Met.
Is he correct that if the price of a product increases, the demand for the product is reduced?
No: an increase in the price of a product will cause a decrease in the quantity demanded of that product, not a decrease in demand.
The law of demand is the assertion that
the quantity demanded of a product is inversely related to its price.
An increase in the price of a product causes a decrease in quantity demanded because of the income and substitution effects. More specifically,
the substitution effect is the decrease in quantity demanded because the product is more expensive relative to other goods and the income effect is the decrease in quantity demanded owing to the decline in consumers' purchasing power.
a. What approach to analyzing demand curves is Becker describing?
. the ceteris paribus condition
What do economists mean when they use the Latin expression ceteris paribus?
All else equal.
Which of the following would not shift the demand curve for a good or service?
a change in the price of the good or service
Economists refer to the necessity of holding all variables other than price constant in constructing a demand curve as the
ceteris paribus condition.
a. If the price of digital books rises, what would you expect to happen to the demand for print books? If many book readers consider print books and digital books to be substitutes, then an increase in the price of digital books will
increase the demand for print books, shifting the demand curve for print books to the right.
the law of demand is the
rule that, holding everything else constant, when the price of a good falls, the quantity demanded will increase, and when the price of a good rises, the quantity demanded will decrease.
Briefly discuss what might account for this result and why it differs from the answer you gave to part (a). (Hint: Why was the finding of increased sales of physical books particularly strong for less popular books?)
C. As more books become available as free downloads, readers of these books recommend them to other readers, causing an increase in the demand for both the print and the digital versions of the book, particularly among readers who prefer to read a physical book.
b. Which would be better news for firms selling traditional canned tuna: Fact (i)is more important in explaining their declining sales than fact (ii),or the reverse?
Firms would prefer fact (ii)more than fact (i)because it is easier for the traditional canned tuna producers to change their marketing strategy and also offer their tuna in pouches and trendy flavors than it is to change the minds of millennial and generation Z consumers about the desirability of eating tuna.
b. As an economist, how can you hope that your analysis of the demand for butter is accurate if you neglect thousands and thousands of other variables?
In the model of demand and supply, we focus only on the variables that experience has shown are the most important in determining the demand for a product: income, price of substitutes and complements, taste for the good, population, and the expected future price.
How has the one-child policy changed the relative demand for goods and services in China?
It has undoubtedly shifted away from goods and services appealing to youthful buyers, particularly youthful female buyers.
Which of the following is the correct definition of demand curve?
a curve that shows the relationship between the price of a product and the quantity of the product demanded
The decline in the number of cable television subscriptions is likely the result of
a leftward shift in the demand curve, but you would need to have information on changes (if any) in the price of cable television subscriptions to be sure.
A good for which demand increases as income rises is ________, and a good for which demand increases as income falls is ________.
a normal good; an inferior good
The falling sales of traditional cans of tuna are the result of
a shift in the demand curve for tuna to the left.
Which of the following is the correct definition of demand schedule?
a table that shows the relationship between the price of a product and the quantity of the product demanded
As a forecaster working for Allbirds, you should be concerned about point (a) and (b) because
both limit the size of the market. On the other hand, increased everyday comfort brought from the shoes may increase the demand for the shoe, causing an increase in sales.
From the list below, select the variable that will cause the demand curve to shift:
consumer income
________ is used to describe how changes in price affect a consumer's purchasing power, and ________ is used to describe how a change in price affects the quantity demanded of a good by making it more or less expensive than substitute goods.
The income effect; the substitution effect
The article also explained that New York City experienced an increase in the number of tourists during 2018 and that during the year, the Met offered several exhibitions that received good reviews. Does this additional information help you answer the question in part (a)?
Yes, this additional information reinforces the increase in demand for visits to the Met in part (a).
