Exam 3: Demand, Supply, and Market Equilibrium

Refer to the information provided in Scenario 2 below to answer the questions that follow. SCENARIO 2: Graphically illustrate each of the following effects on the market for home fitness equipment with supply and demand curves. State the effects on price and quantity. Consider each effect separately. -Refer to Scenario 2. Assume that the price of dues in local health clubs decreases.

SCENARIO 1: Consider the market for generic light beer, a product that only has "Light Beer" on its label. We know that demand for generic light beer falls when income increases, demand rises when the price of other beer increases, and that demand rises when the price of potato chips falls. -Refer to Scenario 1. Graph and explain the effect on equilibrium price and quantity of an increase in income. What type of good is "Light Beer"?

Suppose the price and quantity of steel fell at the same time. What might be the likely explanation of this using supply and demand analysis?

Explain the law of demand. What does it imply about the shape of the demand curve?

Refer to the information provided in Scenario 2 below to answer the questions that follow. SCENARIO 2: Graphically illustrate each of the following effects on the market for home fitness equipment with supply and demand curves. State the effects on price and quantity. Consider each effect separately. -Refer to Scenario 2. The existence of a new health craze occurs simultaneously as new home exercise products enter the market.

Draw a hypothetical example of the demand curve for gasoline and explain it.