Practice and Apply

True

T/F= When the demand curve and the supply curve shift in the directions indicated on this graph, the effect on the equilibrium price is clear even without knowing the magnitude of the shifts.

True

T/F= Cheese is a complement for hamburgers. If the price of hamburgers rises, the quantity of hamburgers demanded falls , which lowers the demand for cheese. Because of the change in the equilibrium quantity of cheese, the demand for milk by cheese producers falls , causing the equilibrium price of milk to decrease . This means producers of butter face lower input prices, and the supply of butter increases . The resulting fall in the price of butter causes people to substitute away from jam and toward butter , so the demand for jam falls .

True

T/F= Ketchup is a complement (as well as a condiment) for hot dogs. If the price of hot dogs rises, the quantity of hot dogs demanded falls , which lowers the demand for ketchup. Because of the change in the equilibrium quantity of ketchup, the demand for tomatoes by ketchup producers falls , causing the equilibrium price of tomatoes to decrease . This means producers of tomato juice face lower input prices, and the supply of tomato juice increases . The resulting fall in the price of tomato juice causes people to substitute away from orange juice and toward tomato juice , so the demand for orange juice falls .

True

T/F= Oyster crackers are a complement for clam chowder. If the price of clam chowder falls, the quantity of clam chowder demanded rises , which raises the demand for oyster crackers. Because of the change in the equilibrium quantity of oyster crackers, the demand for wheat flour by oyster cracker producers rises , causing the equilibrium price of wheat flour to increase . This means producers of bread face higher input prices, and the supply of bread decreases . The resulting rise in the price of bread causes people to substitute away from bread and toward cereal , so the demand for cereal rises .