10 questions
Note about how to answer the questions:
The first part of the answer is only one
of these options:
•decrease in supply
•increase in supply
•decrease in demand
•increase in demand
The second part is one of the options
below (if you choose change in demand, then the 2nd part must be a demand
determinant and the same for supply):
Demand Determinants
•Consumer tastes &
preferences
•Number of buyers in
the market
•Change in consumer
income
•Change in price of a
related good (specify substitute or complementary good)
•Consumer expectations
Supply Determinants
•Resource prices
•Improvements in
technology
•Taxes & Subsidies
•Prices of other goods
•Producer expectations
Number of sellers in the market
For each scenario in the attached document, identify whether there has been an
increase in demand, a decrease in demand, an increase in supply or a decrease
in supply and state which determinant accounts for the shift. An example is
below.
Example: Corporate income tax rates
for businesses increase. How will this affect the market for
most goods and services?
Decrease in supply Change in taxes or
subsidies
Document Preview: Note about how to answer the questions:
The first part of the answer is only one of these options:
decrease in supply
increase in supply
decrease in demand
increase in demand
The second part is one of the options below (if you choose change in demand, then the 2nd part must be a demand determinant and the same for supply):
Demand Determinants
Consumer tastes & preferences
Number of buyers in the market
Change in consumer income
Change in price of a related good (specify substitute or complementary good)
Consumer expectations
Supply Determinants
Resource prices
Improvements in technology
Taxes & Subsidies
Prices of other goods
Producer expectations
Number of sellers in the market
For each scenario below, identify whether there has been an increase in demand, a decrease in demand, an increase in supply or a decrease in supply and state which determinant accounts for the shift. An example is below.
Example: Corporate income tax rates for businesses increase. How will this affect the market for
most goods and services?
Decrease in supply XXXXXXXXXXChange in taxes or subsidies
1. A popular late-night talk show host discusses the health benefits of not smoking and has several celebrity guests promote this idea with entertaining anti-smoking skits. This has convinced a significant number of people to quit smoking. How will this affect the market for cigarettes?
2. The price of computer chips decreases significantly, enabling manufacturers of hard drives to produce more hard drives. How will this affect the market for hard drives?
3. A national prescription lens association engages in a major ad campaign to convince people that glasses that automatically darken with exposure to sunlight are much healthier for your eyes than glasses that do not. The campaign has been very effective. How will this affect the market for prescription lens that automatically darken?
4. The price of fertilizer has increased. How will this affect soybean...