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Eco 204 -Supply and Demand Curves

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ECO204-Principles of Microeconomics
Ashford University
Prof. Evelyn Bolden
Supply and Demand Curves
Do you agree or disagree with each of the following statements? Briefly explain your answers.
1. The price of a good rises, causing the demand for another good to fall. The goods are therefore substitutes.
Substitute goods are those that can be used in place on one another -- Pepsi and Coke, for example. Substitutes are different goods that compete with the one under consideration. Therefore is the price of Pepsi goes up, it caused for Coke to increase its demand not fall. As a result, I disagree with the above statement.
Increase in the price of a complement for X



2. A shift in supply causes the price of a good to fall. The shift must have been an increase in supply.
I agree with the above statement, because a change in supply affects the price and quantity of the product.
a. An increase in supply (a shift rightward of the supply curve) causes the price to fall and the quantity to increase.

b. A decrease in supply (a shift leftward in the supply curve) causes the price to rise and the quantity to decrease.

3. During 2007, incomes rose sharply for most Americans. This change would likely lead to an increase in the prices of both normal and inferior goods.
When individuals have more income, they are normally more likely to purchase a good at any given price. For example, if a family’s income rises, it is more likely to take that summer trip to Disney World—and therefore also more likely to buy plane tickets. So a rise in consumer incomes will cause the demand curves for most goods to shift to the right.

Why do we say “most goods,” not “all goods”? Most goods are normal goods— the demand for them increases when consumer income...

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