1. Suppose an increase in consumers' income causes a decrease in the demand for chicken and an increase in the demand for potatoes. Which good is inferior and which is normal? How will the equilibrium price and quantity change for each good?2. If the demand and supply curve for dishwashers are:D = 200 – 8P, S = 32 + 6PWhere P is the price of dishwashers, what is the quantity of dishwashers bought and sold at equilibrium?3. Markets tend toward equilibrium and, as a result, will tend to eliminate shortages and surpluses. Why?4. What is the difference between a shift of the demand curve and movement along the demand curve? Make sure to explain what determinants can cause a shift and movement along the demand curve.5. Explain the impact of:a. A rent ceiling set below the equilibrium price.b. A price floor set above the equilibrium price.

Question
Asked Feb 12, 2019
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1. Suppose an increase in consumers' income causes a decrease in the demand for chicken and an increase in the demand for potatoes. Which good is inferior and which is normal? How will the equilibrium price and quantity change for each good?

2. If the demand and supply curve for dishwashers are:

D = 200 – 8P, S = 32 + 6P

Where P is the price of dishwashers, what is the quantity of dishwashers bought and sold at equilibrium?

3. Markets tend toward equilibrium and, as a result, will tend to eliminate shortages and surpluses. Why?

4. What is the difference between a shift of the demand curve and movement along the demand curve? Make sure to explain what determinants can cause a shift and movement along the demand curve.

5. Explain the impact of:

a. A rent ceiling set below the equilibrium price.

b. A price floor set above the equilibrium price.

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Expert Answer

Step 1

1.

The demand for chicken:

The demand for chicken is inferior good, because its demand decreases when consumer income increases. Since, the demand decreases, the equilibrium price and quantity will fall and it leads to shift the demand curve to the leftward direction.

The demand for potatoes:

 The demand for potatoes is a normal good, because its demand increases when consumer income increases. Since, the demand increases, the equilibrium price and quantity will increase and it leads to shift the demand curve to the rightward direction.

Step 2

2.

The given information:

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Step 3

Equilibrium price:

Equate demand and supply to get the value of equilibr...

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