Answer to Question #224269 in Microeconomics for sultan

Question

Equilibrium is achieved when quantity demanded intersect with quantity supplied. Assume a product “Y” for which supply and demand shifts. You are required to prepare graphs of each situation given below? i. Increase in income: Y is a normal good. ii. Increase in income: Y is an inferior good. iii. Decrease in the price of a substitute for Y. iv. Decrease in the price of a complement for Y. v. Increase in the cost of production of Y.  

Answer 1

i)

ii)

iii)

iv)

v)

NB//

There are five significant factors that cause a shift in the demand curve: income, trends and tastes, prices of related goods, expectations as well as the size and composition of the population.

Supply shifters include (1) prices of factors of production, (2) returns from alternative activities, (3) technology, (4) seller expectations, (5) natural events, and (6) the number of sellers