Free «Review on Effects of Demand and Supply» Essay Sample

If the cost of operating fishing boats increases, the quantity of fish supplied will decrease while the demand for fish will remain constant. The study that eating fish can reduce the risk of cancer and heart attack will cause an increase in the demand for fish. Consequently, the price of fish will increase since the demand increases. The study that pregnant women and children should reduce the consumption will trigger a reduction in the quantity demanded. When more fish hatcheries open up, there will be increased supply of fish while the demand will remain constant. When the price of beef increases, consumers will tend to shift to buying fish since it is a substitute for beef. Therefore, the demand for fish will increase. When water is polluted and many fish die, the amount of fish supplied will reduce.

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Chapter 2: Review Question 2

The demand for product B will experience several short-term effects depending on the following observations. When product B becomes less common, the demand for the product B will reduce. When the price of replacement product C falls, the demand for product B falls. This is because many customers will choose the replacement product.  This is because a replacement product will perform the same purpose with the intended product. If consumer revenue decline, the demand for product B will reduce. This is because the consumers will tend to save money for precautionary motive. If the consumers anticipate that the price of product B will be higher in the future, more consumers will require more of the product now for safety motive. Therefore, the demand for the product will increase. When the price of the complementary product D falls, this will have minimum or no effect on the demand or the supply curve.  This is because the corresponding product D is used together with product B. If axes are imposed on product B, the price of the product will grow and therefore its request will decrease. This is because taxes are meant to increase the government earnings from the product, such as value added tax. When more consumers enter the market for product B, the demand of the product will increase.

Chapter 2: Review Question 5

Ey=% change in Q / %change in Y

Ey is the income elasticity of demand

Percentage change in Q= 0.1

Percentage change in Y= -0.2

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- 0.2= 0.1/ change in Y


The employer's expenditure will decrease by 2%

Chapter 3 Review Questions a, b and c

When a price floor is introduced on the wages of the construction workers, the cost of housing will increase. This will cause the supply to reduce. When students realize they have been located near a freeway and start to look for apartments elsewhere, the demand for the houses will shift to the left, meaning there will be a decrease in demand for houses. When the newspaper reports that crime rates have reduced around the university, the students will demand more houses around the university. Therefore, the demand curve will shift to the right, meaning that there will be an increased demand for houses.

Chapter 3 Review Questions 2

When there is advancement in technology that will make the cost of product B less costly the supply of product B will increase. This is because fewer amounts are needed to produce the product. When a ban is placed completely on complementary product D, the supply of product b will increase. If there is a price increase in the raw materials required to produce product B, then the supply of product B will decrease. When the producers anticipate an increase in demand in future, the supply will decrease. This is because they tend to hoard the product in anticipation of jag gain. If more taxes are imposed on the sale of product B the supply of the product will decrease. If more producers enter the market for product B, the supply will increase.

Chapter 3 Review Questions 3

The price of the new houses will increase while the price of the old hoses will decrease in the short run. This will alter the equilibrium price. The assertion that the price of the existing houses will fall is true

Chapter 4: Questions 1

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In order to solve the issue according to Senator Tobin and Senator Kronen, the local government should take full responsibility by imposing taxes such as licenses to the local people. This will help raise the revenue that will be used to solve their problem. The revenue collected according to Senator Eackmann can then be used in the environmental purposes that he proposes. The federal government can also provide incentives which will motivate the local people. Moreover, he federal government can reduce the interest rates charged from the local people, such interests on loans.

Chapter 4: Questions 2

Building addition highways illustrate that the demand for more transit highways exceeds the supply.  This is based on the congestion witnessed on those highways immediately after the construction is done. It also means that highway trips are more demanding than mass transit. The term needed as being wrongly used in the text since it gives a different meaning.

Chapter 4: Questions 3

The researcher should revise the estimates of the gain in consumer surplus by lowering the estimate. By comparing the results that the researcher would have before the price is revised and that which he would have after the price has been revised, there would be a huge difference in that those obtained before he price revision will be more.

Chapter 4: Question 4

This type of gift giving continues since different people derive maximum satisfaction from different gifts as explained in the utilitarian theory. It is impossible to quantify the amount of satisfaction that a person derives from different gifts.

Chapter 4: Questions 5

It is difficult to implement the utility theory since economists differ on the interpretation of maximum expected utility. This mostly occurs in the short run. Moreover, the inappropriate measurement of possibility or utility makes it hard for economists implement it.

Chapter 5: Question 3

The professor was right in that he enjoyed using his money to get maximum satisfaction as explained by the utility concept.

Chapter 5: Question 4

Breakeven point= fixed costs

Unit sales price/ variable cost

Breakeven point= $100,000


Breakeven point=$50, 000

Chapter 5: Question 5

I have classified the following types of costs below. The paper plates used for each metals variable cost, gasoline used to deliver meals in the leased van is a variable cost, while the annual insurance on the leased van is fixed cost. In addition, real estate taxes on the restaurant a fixed cost while wages full time employees are both fixed cost and a variable cost. Meanwhile electricity to operate his restaurant is a variable cost.

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