ECON: MICRO4 (New, Engaging Titles from 4LTR Press)
4th Edition
ISBN: 9781285423548
Author: William A. McEachern
Publisher: Cengage Learning
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Chapter 4, Problem 3.4PA
To determine
The reason the firm increases the quantity supplied when the
Concept Introduction:
Law of supply states that as the price of the good, increases the quantity supplied of the good increases and vice-versa, other things remaining same.
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2.2. Use a diagram to illustrate what will happen to the equilibrium price and quantity of a product
if the demand for the product increases. Also mention three factors that can cause an increase in
demand.
(10)
(Figure: The Supply of Apple TV Rentals) Use Figure: The Supply of Apple TV Rentals. An increase in the price of online
movie rentals would result in the change illustrated by the move from:
Price of
Apple TV
rental
0
Price of
Apple TV
rental
n
(a)
Quantity (per period)
(c)
Quantity (per period)
Price of
Apple TV
rental
Price of
Apple TV
rental.
0
(b)
S₂
S₁
Quantity (per period)
(d)
Quantity (per period)
Price ($/cup)
4
3.5
3
2.5
2
1.5
1
0.5
0
0
10 20
Original Supply
A decrease in the price of coffee beans.
New Demand
Original Demand
30 40 50 60 70 80 90
Quantity (cups/hour)
New Supply
The figure above refers to the market for coffee. What might cause a shift from the original demand
curve to the new demand curve? Check all that apply.
An increase in the price of tea (a substitute for coffee).
A decrease in income if coffee is an inferior good.
An expectation that coffee prices will fall in the future.
A decrease in the price of cream (a complement to coffee)
Chapter 4 Solutions
ECON: MICRO4 (New, Engaging Titles from 4LTR Press)
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