Answered: The following graph shows the market…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter3: Demand And Supply

Section: Chapter Questions

Problem 3SCQ: In an analysis of the market for paint, an economist discovers the facts listed below. State whether...

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Shifts in supply or demand I

The following graph shows the market for donuts in San Francisco, where there are over 1,000 donut shops at any given moment. Suppose the price of muffins increases. (Assume that people regard donuts and muffins as substitutes.)

Show the effect of this change on the market for donuts by shifting one or both of the curves on the following graph, holding all else constant.

Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther.

DemandSupplyPRICE (Dollars per donut)QUANTITY (Donuts)D1 D2 Supply

Now suppose Congress passes a new tax that decreases the income of San Francisco residents.

If donuts are a normal good, this will cause the demand for donuts to

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