Question

1. Think about a good that is available in your local grocery store. Describe one example each of an event that would

1) increase demand for that good;

2) decrease demand;

3) increase supply;

4) decrease supply.

Please be creative and think about factors not just for the grocery store and consumer, but also for producers and distributors, other goods, and non-consumers.

2. Please describe your own personal price elasticity of demand for a normal good that you consume for recreation or pleasure. Please use a specific example of how the price of that good has changed (in $'s and/or %), and your response to that change (in $'s and/or quantity). Based on these numbers, describe the value of your price elasticity of demand for that good.

3. Please give one example of complementary goods, as well an example of substitute goods, from the perspective of a restaurant owner (any food type is ok!). Describe how the business owner will make his decisions on how much of both goods to purchase if the price of one of the goods increases or decreases.

Answer 1

question1 )

a) increase in demand for the good

eg: If according to a new report a good eg: consumption of apple has many health benefits for patients with diabetes / blood pressure etc , then this news will result in an increase in demand for the good .

b) Decrease in demand for the good

As a result of a new government policy , taxes imposed on the incomes of the individual increase then the disposable income of the people will fall causing a fall in demand for the good .

c) Increase in supply

To encourage the production of a good eg: wheat , the government announces subsidy for the farmers so it will reduce the cost to the farmers . This will cause an increase in the supply of the good .

d) Decrease in supply

IF the price of chips used in the production of mobile phones increase , the cost of producing the phones will increase so producers will reduce the supply in the market as input prices have gone up

( answered 1 question with its 4 parts as per the guidelines )