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Introduction to Economics: Assignment

   

Added on  2020-03-16

8 Pages1109 Words116 Views
Running head: INTRODUCTION TO ECONOMICS1INTRODUCTION TO ECONOMICSNameInstitution

INTRODUCTION TO ECONOMICS2Macro Part AQuestion 11a) Equilibrium level shows the market clearing price for goods demanded and goodssupplied. In this case, the equilibrium price is $140 while the equilibrium quantity is 1600units1b) 0 400 800 1200 1600 2000 2400 2500SupplyDemand140E0E1DemandAD00 400 800 1200 1600 2000 2400 2500Quantity140SupplyPriceAD1

INTRODUCTION TO ECONOMICS3Increase in real income raises the purchasing power of the consumers and as a result,television being a normal good whose demand is subject to increase with increase in income,the demand for the TV increases and this increase is represented by the shift in demand curveform AD0 to AD1.The shift in the demand curve also results to the establishment of newmarket equilibrium position which is denoted by E1.Consequently,supply in the market willincrease in order to satisfy the excess demand ultimately resulting to the increase in the pricelevels.Question 2ExplanationThe situation here is consistent with the law of supply and demand. Increase in thesupply of bananas in the market will result to a decrease in the demand for bananas sinceQuantityE1E0AD1SupplyDemandQe’QeAD0Pe’PePrice

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