Okay! Here are some animated gif files for you, if you are so inclined:
Law of Demand: http://www.reffonomics.com/demand1.html
Slope of the Demand Curve: http://apecon.us/currentwork/substitutionincome.gif
Determinants of Demand: http://www.reffonomics.com/determinatesofdemand.html
Questions to ponder:
1. Give two examples of how you have observed the Law of Demand in real life.
2. Explain why a reduction in the price of a normal good does not change the demand for that good.
3. What is the difference between the income effect and the substitution effect?
4. Substitutes, complements, or unrelated? (a) peanut butter and jelly, (b) private and public transportation, (c) Coke and Pepsi, (d) alarm clocks and automobiles, (e) golf clubs and golf balls.
I'll get some on supply up this afternoon or tomorrow morning. :)
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13 comments:
I am answering question 4.
A) Complements
B) Substitutes
C) Substitutes I think, but this one is argueable since many people will drink just Coke or just Pepsi and not the other regardless of price or other factors.
D) Unrelated
E) Complements
The income effect states that when your income is fixed, as the price drops of a certain item, you can purchase more of that item with the same income. So the Demand curve is downward sloping because the quantity demand increases (x axis) as the price drops (y axis). The substitution effect describes the same thing but going in the opposite direction. When the prices increase, the quantity demanded of that good decreases, and people can purchase less. People will then find substitutes to that product and the product's price will continue to increase and people will be able to purchase less and less of the product.
answering number 4
a. complements
b. substitutes
c. substitutes, though like brent said, there are many who won't switch no matter what.
d. unrelated
e. complements
4. A: complements
B: substitues
c: subs
D: unrelated
E: complements
I like grape jelly better than strawberry, just to let you know...
2. The reduction of price or the rise of a price or even the double back triple sowcow of price doesnt change demand. Change in price doesnt affect demand, only demand quantity. If i am willing to pay $2.50 for a small cookie dough candy freeze with no whip cream but a cherry, the fact that they drop the price by 50 cents doesnt mean i am then only willing to pay $2.00 for it now. I still will pay $2.50 for it (actually i would probably pay ten dollars for it cause it sounds really good right now), the only difference is that now i only have to pay $2.00 leaving me with an extra 50 cents to go buy two gumballs with.
4.
A. Complements
B. sustitutes
C. Substitutes, although I know my mom would never drink Coke, no matter how the price or pepsi or coke changed.
D.Unrelated
E. Complements
In response to number 4:
(a) complements
(b) substitutes
(c) substitutes
(d) unrelated
(e) complements
Well for question #2, the answer is quite simple price only changes the quantity demand of the good. Im not going to go as far as morgan in her comment about the double back triple sowcow, but yes there is no change in the demand of a good when price is the only variable that was manipulated.
I'm going to go for #1.
The first way I have experienced the law of demand is an obvious one: gas prices. As gas prices go up, there is less of demand as fewer people want to drive and more people begin to ride bicycles, walk, use public transportation, etc.
The second is with food that is in season. For example, I love fruit, but my mom only buys certain kinds depending on what is in season. For example, she will buy more apples during the fall because that is when they're the cheapest. Apples are available year-round, but more people buy apples in the fall when the price is lower and as a result the quantity demanded rises.
Question 4
a. complements
b. substitutes
c. substitutes
d. unrelated
e. complements
Note to morgan: Raspberry jelly is so much better than grape and strawberry, just to let you know. =)
Question 1
Example 1: I only buy spearmint gum. Sometimes it goes on sale or is sold in packs of three. When this happens, I buy more since it's cheaper. Therefore, the quanity demanded increases.
Example 2: When the price of gas use to go down (as if it ever will again!), people would buy more gas at that time knowing that it wouldn't stay that low for long. There have also been times when gas prices are expected to go up the following days so people go out and fill up. In both cases, the quantity demanded increases because of a price decrease.
4
A) Compliments
B) Substitutes
C) Substitutes
D) Unrelated
E) Compliments
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