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Demand Shifters and Market Forces

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Explain the five demand shifters in managerial econimics-consumer income, prices of related goods, advertising and consumer taste, population, and consumer expectations and how they effect market forces.

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There are various factors that influence demand and some of the most important are the ones listed above.

1. Consumer Income: This is the most important component that determines demand. If people have more money they are likely to spend more. If they spend more the demand for goods will rise and the demand curve will shift to the right. What this indicates is that they are willing to buy more units of any good at a given price level. The opposite will happen if the income falls: people will have less money, they will buy lower amount of goods, and the demand curve will shift to the left.

This also holds true in a very intuitive way: if you as an individual have more money you will spend more and vice versa. When this thing happens on an economy wide scale, primarily due to the phase in the business cycle, the demand curve of different goods shift. For example, over the last 5 years or so (2002-2007) before the current recession hit the Chinese demand for commodities raised the prices of almost all commodities. What was happening was that China had more money, they were spending it on goods they needed, and this increase the worldwide demand since China is one of the largest economies of the world.

2. Prices of Related Goods: This aspect is easier explained using a common good and how one spends money on that. ...

Solution Summary

This solution lists five demand shifters in Managerial Economics.

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Assessing Economics: Unemployment and Taxes

** describe the major sources of income and expenditures for households... in question 1**
1) (Evolution of the household) Determine whether each of the following would increase or decrease the opportunity costs for mothers who choose not to work outside the home. Explain your answers...
a. higher levels of education for women
b. higher unemployment rates for women
c. higher average pay levels for women
d. lower demand for labor in industries that traditionally employ large numbers of women.

2) (tax rates) Suppose taxes are related to income as follows:
Income taxes
$1000.00 $200.00
$2000.00 $350.00
$3000.00 $450.00
a. what percentage of income is paid in taxes at each level?
b. Is the tax rate progressive, proportional, or regressive?
c. What is the marginal tax rate on the first $1000.00 of income? The second $1000.00? The third $1000.00?

3) (demand shifters) List five things that are held constant along a market demand curve, and identify the change in each that would shift the demand curve to the right- that is, that would increase demand.

**for question 4 explain why a supply curve usually slopes upward****
4) (Supply) Why is a firm willing and able to increase the quantity supplied as the product price increases?


2) (measuring unemployment) Suppose that the U.S non-institutional adult population is 230 million and the labor force participation rate is 67%...
a. What would be the size of the U.S. labor force?
b. If 85 million adults are not working, what is the unemployment rate?

3) (Types of unemployment) Determine whether each of the following would be considered frictional, structural, seasonal, or cyclical unemployment:
a. A UPS employee who was hired for the Christmas season is laid off after Christmas.
b. A worker is laid off due to reduced aggregate demand in the economy.
c. A worker in a DVD rental store becomes unemployed as video on demand cable service becomes more popular.
d. A new college graduate is looking for employment.

5) (the meaning of full employment) When the economy is at full employment, is the unemployment rate at 0%? Why or why not? How would a more generous unemployment insurance system affect the full employment figure?

1) (measuring labor productivity) How do we measure labor productivity? How do changes in labor productivity affect the U.S. standard of living?

5) (long term productivity growth) Suppose that two nations start out in 2013 with identical levels of output per work hour--- say $100.00 per hour. In the first nation labor productivity grows by 1% per year. In the second, it grows by 2% per year. Use a calculator or spreadsheet to determine how much output per hour each nation will be producing 20 years later, assuming the labor productivity growth rates do not change. Then determine how much each will be producing per hour 100 years later. What do your results tell you about the effects of small differences in productivity growth rates?

7) (technological change and unemployment) What are some examples of technological change that has caused unemployment? And what are some examples of new technologies that have created jobs? How do you think you might measure the net impact of technological change on overall employment and GDP in the United States?

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