For each of the following changes in the market for apples, explain why demand will increase, decrease, or remain unchanged 1. The price of peanut butter (a complement) increases. 2. Consumer incomes increase (and apples are a normal good). 3. It is confirmed scientifically that an apple a day DOES keep the doctor away. 4. The price of apples decreases. 5. A disease affecting apple trees causes people to expect that there will be no apples next year.

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Chapter1: Making Economics Decisions
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For each of the following changes in the market for apples, explain why demand will increase, decrease, or remain unchanged.
1. The price of peanut butter (a complement) increases.
2. Consumer incomes increase (and apples are a normal good).
3. It is confirmed scientifically that an apple a day DOES keep the doctor away.
4. The price of apples decreases.
5. A disease affecting apple trees causes people to expect that there will be no apples next year.
Transcribed Image Text:For each of the following changes in the market for apples, explain why demand will increase, decrease, or remain unchanged. 1. The price of peanut butter (a complement) increases. 2. Consumer incomes increase (and apples are a normal good). 3. It is confirmed scientifically that an apple a day DOES keep the doctor away. 4. The price of apples decreases. 5. A disease affecting apple trees causes people to expect that there will be no apples next year.
1) There exists negative relationship between complementary goods, i.e. if the price of Petrol rises, then the
demand for car falls. Because both the goods collectively becomes more expensive. In the given case, if the
price of peanut butter which is a complementary good increases, then people find it expensive and tend to
reduce the consumption of the good collectively. So the demand of apple decreases when price of peanut
butter rises.
2) When the income of the consumer increases, then he/she is able to purchase more goods with that income.
There exists positive relation between income of a consumer and demand of the good. As income increases,
demand of the good increases. Here as the income increases, then the demand for apples increases.
3) When it is confirmed that an apple a day, keeps the doctor away then the tastes and preferences of the
people will shift towards the consumption of more apple thus the demand of apples will increase.
Transcribed Image Text:1) There exists negative relationship between complementary goods, i.e. if the price of Petrol rises, then the demand for car falls. Because both the goods collectively becomes more expensive. In the given case, if the price of peanut butter which is a complementary good increases, then people find it expensive and tend to reduce the consumption of the good collectively. So the demand of apple decreases when price of peanut butter rises. 2) When the income of the consumer increases, then he/she is able to purchase more goods with that income. There exists positive relation between income of a consumer and demand of the good. As income increases, demand of the good increases. Here as the income increases, then the demand for apples increases. 3) When it is confirmed that an apple a day, keeps the doctor away then the tastes and preferences of the people will shift towards the consumption of more apple thus the demand of apples will increase.
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