Question

A. Use the Hill method for each these exercises)

5. The government gives out a tax rebate. What happens to the price and quantity of all normal goods?

6. The government gives out a tax rebate. What happens to the price and quantity of all inferior goods?

7. People expect the price of tea to increase. What happens to the price and quantity of all normal goods?

8. People start preferring Tea to coffee. What happens to the price and quantity of tea?

9. There is a baby boom. What happens to the price and quantity of diapers?

10. The cost of making plastic toys increases. What happens to the price and quantity of toys?

11. A new toy store opens. What happens to the price and quantity of toys?

12. A new machine is invented to produce toys faster. What happens to the price and Quantity of toys?

13. A new toy store opens and at the same time people start preferring toys to candy. What happens to the price and quantity of toys?

Answer 1

5. The government gives out a tax rebate. What happens to the price and quantity of all normal goods?

With a government rebate, the cosnumer's disposable income would increase. Therefore they would demand more goods and services. As a result, the demand curve would shift out to the right from D to D' and the quantity would increase to Q'. The price would rise to P'.

6. The government gives out a tax rebate. What happens to the price and quantity of all inferior goods?

With a tax rebate, the disposable income of the consumer's would increase. Therefore their increased purchasing power would allow them to buy superior quality goods and services, the demand for inferior quality goods would fall and the demand curve would shift to the left. As a result, the price and the quantity would fall.

7. People expect the price of tea to increase. What happens to the price and quantity of all normal goods?

As the price expectation of tea increases, consumers would demand more tea in the current period. The demand curve would shift to the right, the price and the quantity would increase.

8. People start preferring Tea to coffee. What happens to the price and quantity of tea?

When the preferences to tea increases, the demand for tea also increases and the demand curve would shift out to the right. As a result, the price and the quantity also increases.

Answers Of Given questions from 9 to 13.

Hope its helpful...please rate the answer...