Question

1-Pick a specific item of clothing (not shoes, not bags, not cosmetics) that you regularly purchase. Then identify four factors that would cause your individual demand for that item to shift in and four other factors that would cause your demand for the same item to shift out.Be specific.

2-Consider very specific products. that you typically purchase.

a) When should the government regulate prices in specific product markets and when should we let supply & demand do their job? (Don't get bogged down in "big issues" such as income distribution or product safety or macro issues)

Think of a product like skirts or blouses. Should the government give out free skirts or blouses to all, or should they be sold in stores? Should the price be kept down by the government, so everyone can afford them? Be sure to justify your answer.

b) Consider the product called 'education.' Why is public school on the elementary and high school level "free" but you need to pay (use supply and demand) for college?.

Hint: Consider/cite specific examples. For example, do we use supply and demand within the family unit? Regulation of housing/construction markets? School vouchers?

Answer 1

1. Blouse is my item of clothing

Factors that can shift my demand for blouse top shift in or decrease my demand for blouse are the following-

i) Decrease in income- If my income or salary goes down i can buy less of blouses.

ii) lower expected price in future- If I believe that price of blouse will be lower in future or probably next week my Demand at present would decrease to buy the blouse in future at lower price.

iii) Decrease in price of substitute- if the price of dresses which are the substitutes for blouse my demand for blouse will fall.

iv) Increase in price of complements- if price of jeans which i wear with blouse hence a complementary good, goes up my demand for blouse will go down.

Factors that would shift the demand for blouse out or increase my demand for blouse are the following-

i) increase in income- with higher income i can buy more blouses.

ii) Decrease in price of substitutes- If my price of dresses decreases, my demand for blouses will increase.

iii) decrease in price of complements- if price of jeans decreases demand for blouse increases.

iv) higher expected price in future- If I believe that price of blouse will be higher next week i would prefer to buy more blouses this week only.