Economics Exercise Topic 2.0 1.

. The demand equation for strawberries in the Eden Village is expressed as Qd (in Kg per week) = 50000 5000 (p). Prepare a table to show how Qd changes as prices rise from $7 to $7.50 to $8 to $8.50. Then draw the demand curve for this product. Price 7 7.50 8 8.50 Qd 15000 12500 10000 7500

Qd

2. Explain the law of demand. The law of demand states that as the price of a product increases, the quantity demanded will become lower, and vice versa.

3. What is the difference between an individual demand curve and a market demand curve? An individual demand is the demand of one individual or firm, while a market demand is the demand is the demand is the total quantity demanded by all consumers.

4. When you draw a simple downward-sloping demand curve, what assumptions are you making about the other factors (e.g. income of buyers, product popularity, etc.) that can affect demand? The other factors are constant.

5. A higher price for the product induces a lower demand. Why is this so? Explain. A higher price is a big obstacle to a buyer because they cannot afford the product and it cost a high opportunity cost.

6. For each of the situation below, identify the factors at play and draw the graph showing their effects on the demand curve of microwave meals:

a) Microwave meals become less fashionable. P

Qd

b) The price of its substitute (say, fast food) increases. P

Qd

c) Income falls and microwave meals is an inferior good P

Qd

d) Consumer believe that the price of microwave meals are going to increase in the near future P

Qd

d) The price of its complementary products (e.g. ketchup, salt, pepper) decreases. P

Qd

7. Explain the effect of number of buyer on the demand of a product. The higher the number of buyers, the higher the demand of product. Thus, the demand curve will swift to left.

8. What do you call goods whose quantity demanded rises when income increase and vice versa? Can you give 2 examples? Goods whose Qd rises when income increase is normal good. For example, food, clothes.

9. What are complementary goods? What happens to the demand of a product when its complementary good experience a price hike? Why? Can you give an example of complementary goods? A complementary goods are those that provide satisfication of a want or need when consumed together. This means when demand of goods decrease, the price of another good is experienced a price hike. This is because the complementary good is more expensive than the original good. For example, car and oil.

10.What are substitute goods? What is the relationship between the demand of a product and the price of its substitute? Why? Provide 1 example of substitute goods. Substitute goods are those that provide the same basic satisfication of need when consumed. This means a demand of good increases, when price of another product increase. This is because the product can be replaced by each other.

11.Can you think of a product whose demand goes up as its price increases? Explain why does the law of demand does not apply to this product. Wine, Jewelry. This is because the demand of these product in the market very high and all of them are limited resources.