Draw a demand curve and label it D1. On the graph, illustrate an increase in demand and a decrease in demand, and label the curves D2 and D3, respectively. Starting on demand curve D1, explain the shift that would result from each of the following events:
a. an increase in income and the good is a normal good
b. an increase in income and the good is an inferior good
c. a decrease in the price of a substitute good
d. a decrease in the price of a complementary good
e. an increase in the taste for the good
f. a decrease in population
g. an increase in the expected future price of the good
a, d, e, and g would increase demand, causing a shift from D1 to D2
b, c, and f would decrease demand, causing a shift from D1 to D3
You might also like to view...
Suppose the price of beans rises from $1.00 a pound to $2.00 a pound, quantity demanded falls from 10 units to 6 units. In this example, the demand for beans is said to be
A) relatively elastic. B) relatively inelastic. C) perfectly elastic. D) perfectly inelastic.
Which of the following shifts both short-run and long-run aggregate supply to the left?
a. a decrease in the actual rate of inflation b. a decrease in the expected rate of inflation c. a decrease in the capital stock d. a drought in the Midwest agricultural areas.