ECON MICRO
5th Edition
ISBN: 9781337000536
Author: William A. McEachern
Publisher: Cengage Learning
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Chapter 4, Problem 1.1P
To determine
Effect on the demand and supply curve.
Concept Introduction:
Demand curve shows all the possible combinations of price and quantity demanded of the good at a given time period.
Supply curve shows all the possible combinations of price and quantity supplied of the good at a given time period.
Expert Solution & Answer
Explanation of Solution
- a. Due to the new cure of lung cancer, the smoker will demand more cigarettes because there is a cure of the lung cancer now. This will shift the demand curve to the right.
- b. Due to the increase in the price of cigars, the demand curve of the cigarettes will shift to the right because cigars are the substitute of the cigarettes.
- c. Due to the increase in the wage, the demand curve of the cigarettes will shift to the right because people now have more money to spend.
- d. Due to the discovery of the new fertilizer, the supply curve of the cigarettes will shift to the right because of the increase in the productivity.
- e. Due to the increase in the price of matches or lighter, the demand curve will shift to the left because matches or lighter and cigarettes are complementary goods.
- f. Due to the new laws which restricts the smoking in public places, the demand curve of the cigarettes will shift to the left because everybody has to respect the law.
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