ECN 320 ECN320 Module 3 Homework Solution (AAU Online)

ECN 320 ECN320 Module 3 Homework Solution (AAU Online)

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PART I: SHORT RESPONSE

1.Explain how the price of a good you buy is affected by changes in the prices of (a) substitute goods and (b) complementary goods.

2.It has just been reported that Happy Smile toothpaste reduces your cavities by 70 percent, while whitening your teeth and freshening your breath.  Explain the report’s likely effect on the price and quantity of this toothpaste’s sales.

3.Do you agree with this statement: “As price goes up, demand goes down”?  Explain your answer.

4.Why does the demand curve slope downward?

5.Why does the supply curve slope upward?

6.If you were a seller, why would you want to limit supply—either by keeping out new market entrants or by establishing production quotas for everyone? And why would you hate that if you were a consumer?

7.How could an economic crisis in Southeast Asia cause the price you pay for gasoline to fall? 

8.If marijuana were legalized, what do you think would happen to the supply and demand curves and the price?

9.You’re moving into a new house one week from today. Checking the local newspaper and the phone book, you find 10 movers. Each one of them gives you a quote at least $1,000 more than you think you should pay. Explain what you will do in terms of demand and supply.

10.During recessions Walmart’s low prices attract more customers. Explain why this means that Walmart is selling inferior goods.

11.The American Medical Association announces that eating three apples a day will promote good health. How would this affect the demand for apples and the equilibrium price and the quantity sold?

PART II: JOURNAL ACTIVITY


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