Question

In: Economics

Which of the following statements is (are) correct? (x) A choice by Molly to buy more...

Which of the following statements is (are) correct?
(x) A choice by Molly to buy more muffins at $2 per muffin than at the price of $3 per muffin is an example of
the law of demand and it is illustrated as a movement along Molly’s demand curve for muffins.
(y) A choice by Albert to buy more Tony’s pizza because of a recent increase in the price of Polly’s pizza is
illustrated as a shift to the right of Albert’s demand curve for Tony’s pizza and reflects an increase in
demand for Tony’s pizza.
(z) If George has a change in behavior and is now willing to buy less apple pie at every price, then his
demand curve for apple pie will shift to the left.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (y) only

Which of the following statements is (are) correct?
(x) Assume pizza and soda are complements. If the price of pizza decreases, then both the demand for soda
will increase and the demand curve for pizza will shift to the right.
(y) Assume Lipton green tea and Arizona green tea are close substitutes. If the price of Lipton tea decreases,
then the quantity demanded of Lipton tea will increase and the demand for Arizona tea will decrease.
(z) Assume Hershey chocolate bars and Mars chocolate bars are substitutes. If the price of Hershey chocolate
bars decreases, then the demand curve for Mars chocolate bars will shift to the left.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (y) only

Which of the following is NOT a determinant of demand?
A. the expected price of the good next month
B. the price of a resource that is used to produce the good
C. the price of a complementary good
D. the price of a substitute good
E. A and B, only

Expert Solution

Answer: A. (x), (y) and (z)

Explanation:

(x)

(y)

(z)

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Answer: D. (y) and (z) only
Explanation:

(x) When price of pizza decreases, demand for pizza increases and the demand for soda also increases since both are complements. However, when we talk about demand curve of pizza, it is on the plane of price and quantity demanded of pizza. Hence, the movement will be along the demand curve of pizza, not due to right shift.

(y) Assume Lipton green tea and Arizona green tea are close substitutes. If the price of Lipton tea decreases,
then the quantity demanded of Lipton tea will increase and the demand for Arizona tea will decrease. This is true, because demand will shift from Arizona tea to Lipton tea because it becomes cheaper given the price of Arizona tea unchanged.

(z) Assume Hershey chocolate bars and Mars chocolate bars are substitutes. If the price of Hershey chocolate
bars decreases, the demand for Hershey chocolate bar increases and demand for Mars decreases. Then the demand curve for Mars chocolate bars will shift to the left since it is on the plane of its own price and own demand. Hence, this statement is true

_______________________________________________________________________________________________
Answer: Option B should be the correct answer.

Explanation:

The expected price of the good next month and prices of related goods (complements and substitutes) are determinants of demand. The resource price adds o the cost and hence it is a determinant of supply.

Option E makes it little confusing, because part of this (A) is a determinant of demand, whereas other part (B) is a determinant of supply.

Rahul Sunny answered 1 hour ago

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