Problem #2

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# Problem #2 - PowerPoint PPT Presentation

Problem #2. Presented by Karina Aleksandrova. Problem #2. Use knowledge of demand to answer six questions Use demand and supply curves for illustration. supply. price. demand. quantity. Effect on the demand for oranges. Supply curve shifts Price rises for the same quantity

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### Problem #2

Presented by

Karina Aleksandrova

Problem #2
• Use knowledge of demand to answer six questions
• Use demand and supply curves for illustration

supply

price

demand

quantity

Effect on the demand for oranges

Supply curve shifts

Price rises for the same quantity

Quantity for the price decreases

Demand curve unaffected

Less quantity demanded with higher prices

Change along the curve

2. a) Freeze in Florida

supply

price

demand

quantity

Effect on the demand for coffee

More quantity demanded at the new lower price

2. b) Price of coffee falls

P1

P2

Q1

Q2

Effect on demand for beans

Inferior good

Demand increases as income falls

2. c) Income falls

price

quantity

Effect on demand for jelly

Complement goods

Decrease in price of peanut butter causes increase of demand for jelly

2. d) Fall in the price of peanut butter

price

quantity

Effect on demand for apples

Demand decreases

Consumer preference is changed

Less quantity demanded at the same price

2. e) Red apples cause cancer

price

quantity

Effect on demand and supply of lumber

Demand increases

More lumber needed to rebuild

More consumers

Supply may decrease if suppliers were affected

More costly to produce lumber

2. f) East coast hurricane

price

quantity

Factors that affect demand
• Price of the good
• a) Freeze in Florida, b) Decrease in price of coffee
• Consumers’ income
• c) Income falls
• Prices of related goods
• d) Fall in the price of peanut butter
• Consumers’ preferences
• e) Red apples cause cancer
• Number of consumers
• f) East coast hurricane