With reference to the difference between a change in demand and a ...

[jrubin]

With reference to the difference between a change in demand and a change in quantity demanded, which of the following is TRUE?
 
  A) If a good's price goes down, then demand for the good will decrease.
  B) If a good's price goes down, then quantity demanded will increase.
  C) If demand increases, then the demand curve will shift to the left.
  D) If price rises and quantity demanded decreases, then the demand curve will shift to the left.

Question 2

Using a graph, show a market equilibrium. Suppose the costs of inputs increase. How is this shown on the graph? Explain what is happening in the market.
 
  What will be an ideal response?

[spencer.martell]

Answer to Question 1

B

Answer to Question 2

In the graph, the original equilibrium is at E, where the demand curve and the supply curve intersect. Price is P1 and quantity is Q1. The increase in costs of inputs causes the supply to decrease, shown by a shift of the supply curve to the left (S1). At price P1, there is an excess quantity demanded equal to Q1 - Q3. Price rises to P2, causing quantity demanded to decrease until the new equilibrium at E is reached. The new price is P2 and the new quantity is Q2.

[jrubin]

Thank you

[spencer.martell]

No problemo