Question

1525 11. Discuss the most significant factors that affect demand for goods and services. 12. What causes for a demand curve to shift to right or to left? When do we move from one point to another on a demand curve, what causes it? 13. Demonstrate graphically how a horizontal summation of individual demand curves provides a "market demand curve." 14. Discuss the most important factors/variables that affect supply of goods and services. 15. Explain the difference between moving on the same supply curve and shifting the curve to right or left. 16. Demonstrate graphically how a horizontal summation of individual supply curves provides a "market supply curve." 17. Explain Market Mechanism, and demonstrate how a market economy relies on price changes to automatically (the invisible hand) eliminate a surplus" or "deficit" 18. Explain what we mean by a "market failure and what government needs to do in the face of a market failure. In your normative opinion, should a society rely on the market alone to determine production of necessities, luxuries, and leisurely goods and services? Explain why you believe so 19. Consider market for a product that is at equilibrium and draw the necessary graphs to demonstrate what will happen to equilibrium price and equilibrium quantity under the situations described below al Price of a substitute goes down, b) Price of a complement goes up c) Consumers' income increases and this is an inferior product. d) Consumers' income declines and this is a normal good el Costs of production increases. f) Costs of production declines. gl Costs of production and consumers' income increase for a normal good. h) Costs of production and consumers' income decline for a normal good i) Costs of production and consumers' income decline for an inferior good. 20. Define elasticity in general by considering two non economic variables (one dependent variable and one independent variable) 21. Refer to shift variables for a demand curve and identify three types of elasticity. Define each one and explain what they measure.

Answer 1

1 A-11 affect the demand for goods. the following factors and sernices - (1) Tastes and preferences of which the consumer - A consumer's good tastes for and ud its demand preferences would be are greater the large as good compared for which to consumer's are tastes and smaller. preferences (2) Income of the people - Greater income leads to greater purchasing power and thus increases demand of the good smaller income lead to fall in the demand of the good. 3 change in prices of related goods - when price of a substitute for a good falls, demand for that good declines and nice-versa. On the other hand, when price of complement rises, then demand of the good falls and nice versa. 4 Number of consumers in the market - The greater the number of consumers, of a good, the greater is the market demand for it o regard to with expectations future prices- Consumer's -5 prices will that expect decrease consumers 4 the demand tuture i then in and declines the present an il increase they expect level in in future, price in demand present will increase. then