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Changes in price and effect on supply and demand

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a. Suppose that someone told you that an increase in the price of DVD players caused a decrease in the demand for DVDs. Is this what you would predict? Why or why not?

b. Suppose that someone told you that an increase in the price of gasoline caused a decrease in the demand for public transportation. Is this what you would predict? Why or why not?

c. Suppose an economic forecasting group has determined that an increase in the price of orange juice has no effect on the demand for soft drinks? What can you conclude from this information?

d. Suppose a decrease in consumers' incomes causes a decrease in the demand for chicken and an increase in the demand for potatoes. Which good is inferior and which is normal? Explain your reasons.

e. How will the equilibrium price and quantity change for each good?

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a.Yes. An increase in the price of DVD players (all else equal) would decrease the demand for DVDs. These complementary goods. As the P of DVD players increase the quantity demanded of DVD players decreases, the fewer DVD players the fewer DVDs demanded to use on those DVD players.

b. I would say that they are wrong. Gasoline powers cars and public transportation is a substitute for automobiles. ...

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