Answer to Question #197124 in Microeconomics for Rauna Ruben

Question

Sketch and explain the demand relationship in each of the following statements.

a) I would never buy donkey meat! You couldn’t even give me one for nothing or

for free.

b) I like canned fish and if the price falls to N$2 per can, I’ll buy out the entire

stock of the Neudamm Campus tuck-shop.

c) Regardless of the price, the quantity demanded of fat-cake by students at

Sam Nujoma Campus doesn’t change.

6.) Use a diagram to illustrate how each of the following events affects the equilibrium

price and quantity of Mexican pizza in Namibia.

a) The price of mushroom rises. Mushroom is the main in Mexican pizza.

b) The health hazards of hamburgers are widely publicised. Hamburgers are

substitute of pizza.

c) The price of tomato sauce falls. Tomato sauce is compliment to Mexican

pizza.

d) The incomes of consumers rise and Mexican pizza is an inferior good.

e) Consumers expect the price of Mexican pizza to fall next week.

Page

Answer 1

5(a) The graph shows demand =0. This is because demand wont change with change in price and quantity.

(b)The graph shows elastic demand whereby a small change in price will lead to change in quantity demanded thus more canned fish will be demanded.

(c) The graph shows a vertical demand whereby the demand is constant because the demand for fat cake wont change regardless of change in price.

6(a) Since mushroom is an input in pizza its rise in price will lead to decreased demand and supply as equilibrium price rise and quantity reduces.

(b)The demand for pizza will increase as people will prefer it hence both equilibrium price and quantity rises.

(c)A fall in price of tomato source will lead to a reduced demand, equilibrium price and quantity of pizza.

(d)Increase in income will reduce demand for pizza hence the equilibrium price and quantity will also fall.

(e)The expectation of pizza price to fall in future will lead to a decrease in demand as people will wait to buy when the price falls thus the equilibrium price and quantity will fall.