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Analyzing demand and supply behavior in the given situations

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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?

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Solution Summary

Solution describes the effect of several factors on demand and supply functions in the given situations.

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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?

Demand curve is negatively slopped i.e. if price of good increases, quantity demanded should decrease.
Since there is increase in prices of DVD players, quantity ...

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  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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