Exam 3: Basic Elements of Supply and Demand Part

Use the following to answer questions : Figure 3-2 -Let P* and Q* represent market clearing price and quantity, respectively.Given the supply and demand curves drawn in Figure 3-2, a reduction in the price of an input used in the production of Q will cause:

When the demand curve shifts to the right:

Given a normal upward sloping supply schedule and a downward sloping demand schedule, an increase in labor productivity should result in a lower equilibrium price for the concerned good.

A drought would probably:

If supply decreases and family income increases, it is possible that the quantity demanded will remain the same.