Chap 2

Question 1

Law of Demand

Answer 1

Decrease P, Q that W + A to buy increases
contract - Q= 0

Question 2

What are conditions of demand

Answer 2

SCIIT - shift the demand curve

Substitute - DECREASE $ of S DECREASE demand
Complement Decrease $ of C INCREASE demand
Income DECREASE Income DECREASE demand
Tastes and Preferences
Interest rates INCREASE IntR DECREASE Demand (many goods bought on credit)

Question 3

What is a normal/inferior good

Answer 3

Normal good: Increase income, increase demand
Inferior good: Increase income, decrease demand

Question 4

Law of Supply

Answer 4

Increase P, Increase Q that suppliers are W + A to supply

Question 5

Shifts in supply curve

Answer 5

CPGCSN

Cost of production: DECREASE CoP INCREASE DEMAND
Changes in production tech:
Gov tax + subsidies
Climate
Substitute INCREASE price, DECREASE SUPPLY (inwards) - more profit
N. producers INCREASE, INCREASE supply

Question 6

Surplus

Answer 6

COnsumer surplus - triangle of grpah - willing to buy more than eqm price
producer surplus - triangle of graph - willing to sell for less than eqm price

Question 7

Excess

Answer 7

Supply - price above eqm point
Demand - price below eqm point