Economics Assignment

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ECONOMICS ASSIGNMENT

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Contents
Question 1..................................................................................................................................3
Question 2..................................................................................................................................5
Question 3..................................................................................................................................6
Question 4..................................................................................................................................7
Question 5..................................................................................................................................7
Reference....................................................................................................................................9

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Question 1
a) As the price of a leather jacket decreases, customers will shift to the market of leather
jacket and demand for woollen jumpers will reduce. The demand curve for woollen jumpers
will shift to the left and hence both price and quantity will reduce (Friedman, 2017).
Figure 1: Reduction in demand for woollen jumpers
(Source: Friedman, 2017)
b) Adoption of the new knitting machine which increases the productivity will allow the
sellers to produce more good at any given cost. That means the supply curve will shift to the
right and new equilibrium price will be lower and the quantity will be more than the initial
equilibrium.