Question

12. What causes for a demand curve to shitft 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: a) 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. e) Costs of production increases. f) Costs of production declines. g) Costs of production and consumers' income increase for a normal good. h) Costs of production and consumers' income decline for a normal good. Costs of production and consumers' income decline for an inferior good. i) 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 i one and explain what they measure.

Answer 1

12. Factors that lead to the shift of demand curve to right or to left-

1. Price of substitute goods

2. Price of Complementary goods

3. Income level

4. Taste/ Preferences

5. Change in the number of consumers

When there is a change in price level, there is a movement along the demand curve. Since demand curve is drawn with respect to price level