Problem #2 Presented by Karina Aleksandrova

Problem #2 Use knowledge of demand to answer six questions Use knowledge of demand to answer six questions Use demand and supply curves for illustration Use demand and supply curves for illustration quantity price supply demand

2. a) Freeze in Florida Effect on the demand for oranges Effect on the demand for oranges Supply curve shifts Price rises for the same quantity Quantity for the price decreases Demand curve unaffected Less quantity demanded with higher prices Change along the curve quantity price supply demand

2. b) Price of coffee falls Effect on the demand for coffee Effect on the demand for coffee More quantity demanded at the new lower price Q1 P1 P2 Q2

2. c) Income falls Effect on demand for beans Effect on demand for beans Inferior good Demand increases as income falls quantity price

2. d) Fall in the price of peanut butter Effect on demand for jelly Effect on demand for jelly Complement goods Decrease in price of peanut butter causes increase of demand for jelly quantity price

2. e) Red apples cause cancer Effect on demand for apples Effect on demand for apples Demand decreases Consumer preference is changed Less quantity demanded at the same price quantity price

2. f) East coast hurricane Effect on demand and supply of lumber Effect on demand and supply of lumber Demand increases More lumber needed to rebuild More consumers Supply may decrease if suppliers were affected More costly to produce lumber quantity price

Factors that affect demand Price of the good Price of the good a) Freeze in Florida, b) Decrease in price of coffee a) Freeze in Florida, b) Decrease in price of coffee Consumers’ income Consumers’ income c) Income falls c) Income falls Prices of related goods Prices of related goods d) Fall in the price of peanut butter d) Fall in the price of peanut butter Consumers’ preferences Consumers’ preferences e) Red apples cause cancer e) Red apples cause cancer Number of consumers Number of consumers f) East coast hurricane f) East coast hurricane

Any Questions?