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posted by  mhg on 7/1/2009 4:20:22 AM  |  status: Live  |  Earned Karma: 25

Shifting Demand

Course Textbook Chapter Problem Needs by
Economics Macroeconomics by William A McEachern student edition 4 N/A N/A
Question Details:
Use demand and supply curve to discuss the effect of each on the market for cigarettes:
a) A cure for lung cancer is found
b) The price of cigars increases
c) Wages increase substantilly in states that grow tobacco
d) A fertilizer that increases the yield per acre of tobacco is discovered
I am not sure on what to put for the x and y axis. Should I use dollar amounts, no. of cases? Please help. Thank you.
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Sage
Karma Points: 3,506
posted by Domokun on 7/1/2009 9:45:41 AM  |  status: Live
Asker's Rating: Helpful   
Response Details:
a) The discovery of a cure for lung cancer will increase the demand for cigarettes. The people previously put off by the health hazards presented by smoking will now try out smoking. The result is increased quantity and increased price.

b) Cigars are a substitute for cigarettes. If the price of cigars increases, the demand for cigarettes will increase because cigarettes will be relatively cheaper. The result is increased quantity and increased price.

c) An increase in wages will shift the supply curve to the right, because more people are now willing to provide labor. The result is increased quantity and decreased price.

d) The fertilizer is like a technological improvement, which will shift the supply curve outwards to the right. The result is increased quantity and decreased price.

Tags: Demand, Supply
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