Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more
Download
Standard view
Full view
of .
Save to My Library
Look up keyword
Like this
0Activity
0 of .
Results for:
No results containing your search query
P. 1
Economics Demand and Supply Questions & Answers

Economics Demand and Supply Questions & Answers

Ratings: (0)|Views: 5,289 |Likes:
Published by Wajeeh Abbas
Economics assignment
Economics assignment

More info:

Published by: Wajeeh Abbas on Jul 23, 2010
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, TXT or read online from Scribd
See more
See less

03/03/2013

pdf

text

original

 
 
Principle of Economics
Assignment # 02
Saudi Community Institute
BBA LEVEL # 01PREPARED BY: KAMRAN OMARWAJEEH ABBASSUBMITTED TO: MR. NAJEEB
7/25/2010
 
Page
2
of 
10
 
Question1: Explain the law of demand. Why does a demand curve slopedownward? What are the determinants of demand ? what happens to thedemand curve when each of these determinants changes? Distinguishbetween a change in demand and a change in the Quantity demanded,noting the causes if each?Answer
: As prices change because of a change in supply for a commodity, buyerswill change the quantity they demand of that item. If the price drops, a largerquantity will be demanded. If the price rises, a lesser quantity will be demanded.The demand curve slopes downward because of the substitution and incomeeffects. When the price of a commodity decreases relative to that of substitutes, abuyer will substitute the now cheaper commodity for those whose prices have notchanged. At the same time, the decreased price of the commodity underdiscussion will make the buyer wealthier in real terms. More can be bought of thiscommodity (as well as of others whose prices have not changed). Thus, thesubstitution and income effects reinforce each other: More will be bought of anormal (or superior) commodity as its price decreases. On a graph with price onthe vertical axis and quantity on the horizontal, this is shown as a demand curvesloping downward from left to right.The fundamental determinant of demand is the price of the commodity underconsideration: a change in price causes movement along the commodity's demandcurve. This movement is called a change in quantity demanded. Decreased priceleads to movement down the demand curve: There is an increase in quantitydemanded. Increased price leads to movement up the demand curve: There is adecrease in quantity demanded.In addition, there are determinants of demand, which are factors that may shift thedemand curve, i.e., cause a "change in demand." These are the number of buyers,the tastes (or desire) of the buyers for the commodity, the income of the buyers,the changes in price of related commodities (substitutes and complements), andexpectations of the buyers regarding the future price of the commodity underdiscussion.The following will lead to increased demand: more buyers, greater desire for thecommodity, higher incomes (assuming a normal good), lower incomes (assumingan inferior good), an increased price of substitutes, a decreased price ofcomplements, and an expectation of higher future prices. This increased demandwill show as a shift of the entire demand curve to the right. The reverse of all the
 
Page
3
of 
10
 
above will lead to decreased demand and will show as a shift of the entire demandcurve to the left.
Question2: WHAT EFFECT WILL EACH OF THE FOLLOWING HAVE ON THEDEMAND?
Answers:
A. PRODUCT B WILL BECOME MORE FASHIONABLE: Demand for Product Bwill definitely rise. Fashion trends have a direct influence on product demand.B. THE PRICE FOR SUBSTITUTE PRODUCT C FALL: With the entry of cheaperproduct substitutes for Product B, demand for Product B is expected to declineover time.C. INCOME DECLINES AND PRODUCT B IS AN INFERIOR GOOD: Decrease inconsumer incomes and the poor quality of Product B, demand forProduct B will definitely decrease.D. CONSUMERS ANTICIPATE THAT THE PRICE OF B WILL BE LOWER INTHENEAR FUTURE: Hence, surge in consumer demand can expected in the nearfuture
for the mean time, demand for Product B will remain unchanged.E. THE PRICE OF COMPLEMENTARY PRODUCT D FALLS: This could bolsterconsumer preference for Product B, hence may result to continued consumerpatronage and/or increase in demand.
Question3: ASSESS THE EFFECTS OF THE TERRORIST ATTACKS OFSEPTEMBER 11, 2001 AND THE WAR ON TERRORISM ON THE DEMANDFOR THE FOLLOWINGITEMS IN THE UNITED STATES: AIRLINE TICKETS,GASOLINE, HOTELROOMS, BOOKS ABOUT AFGHANISTAN AND ARABICINTERPRETERS.Answer
: The 9/11 terror attacks on US soil and the resulting war on terrorismdefinitely have a negative impact on the travel industry worldwide (that is fromairline to the hotel industries). Since the attacks were perpetuated by terror groupsbased in the Middle East, Middle East nationals became suspect while Arabicculture and literature turned out to be unpopular. With the exception of oil and gasproducts, demand for the items mentioned above dramatically fell, especiallyduring the years immediately following the incident. Demand for Middle East oilproducts was not affected.

Activity (0)

You've already reviewed this. Edit your review.
1 hundred reads
1 thousand reads
Asheqin Zafeera liked this
chang1968 liked this
Nishika NJ liked this
Nishika NJ liked this
Hamad Onso liked this

You're Reading a Free Preview

Download
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->