Question

and B are complements and the cost of a factor of production used in the production decreases, then the price of of A 34) A) both A and B will fal в) A will fall and the price of Bwill rise. C) both A and B will rise. D) A will fall and the price of B will remain unchanged. E) A will rise and the price of B will fal. 35) The Genitus Software Company has developed with Einstein Computers. As a result, the equilibrium price of A) rival software packages falls leading to an overalil increase in the equilibrium an amazing new software package to be used only 35) these packages. B) Einstein computers rises, leading to a decrease in the equilbrium quantity C) all software packages rises. D) all computers rises. E) Einstein computers rises, accompanied by an increase in the equilibrium quantity. 36) When the price of good A rises, the supply curve of good B shifts rightward. Which of the following 36) statements are true? A) A and B are substitutes. B) A and B are complements. C) A is a factor used in the production of B. D) A and B are complements in production. E) A and B are substitutes in production. e figure below to answer the following questions Table 35.2 Demand and Supply Schedules for Cups of Coffee each day at CoolU Quantity Demanded Quantity Supplied (dollars per cup) (ups of coffee per day) (cups of coffee per day) 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50 1,100 1,000 200 600 800 1,000 1,200 1,400 1,600 800 37) Refer to Table 3.5.2. Professor Hyper publishes a new study, showing that coffee raises the test students. Students double their demand for coffee and the quantity of coffee performance of demanded at each price doubles. In the supply of coffee is cut in half. The new equilibrium price is quantity iscups a day addition, a premature frost destroys half the coffee trees and and the D) 1.10; 400 E) 1.50, 400. C) 1.10;1,600 B)1.50; 800 A) 1.10; 800

Answer 1

34) If A and B are complementary goods, it implies that both of them are consumed together.

We are given that the cost of production of A reduces, this would lead to a decrease in price of A. When the price of A reduces due to law of demand, the demand for A would increase. This would lead to an increase in the demand for good B since they are consumed together. So when the dwdema of B increases, due to law of demand, the price of B would increase.

Hence the price of A falls and B rises . Option B is the answer.

35) We are given that the software would be used only with Einstein computers. This would mean that since the software is amazing, the demand for it would be high. Higher demand would mean that the demand for complement good ie Einstein computers would also increase since they are to be consumed together. A higher demand with constant supply means that both the equilibrium Price and quantity would rise.

So the answer of option E) Einstein computers rises accompanied by an increase in equilibrium quantity.

36) We are given that price of good A rises and this shifts the supply curve of good B to right. The supply curve is shifted to right ie the supply increased. This means that A and B are complimentary goods in production . These are the goods wherein the increase in price of one good increases the supply of another.

Answer is option D) A and B are complements in production.

37) Due to the new study, the quantity demanded for coffee increases at every price and due to Frost the supply has reduced to half every level.

Price	quantity demanded	quantity supplied
0.70	2400	0
0.80	2200	100
0.90	2000	200
1	1800	300
1.10	1600	400
1.20	1400	500
1.30	1200	600
1.40	1000	700
1.50	800	800

From this new table we can clearly see that the new equilibrium would be at $1.50 and at 800 units of coffee. SOI answer is B) $1.50,800

(You can comment for doubts)