Economic for Managers Tutorial in Week 3

Technical questions:

1.

a. An increase in consumer income will enable more consumers to consider buying entertainment equipment, so it will increase the demand of computers.

b. An increase in the price of computers will reduce the demand of computer, because only a few consumers can afford a high-price computer.in addition an increase price will make consumers become hesitant, as they think the price will fall back to earlier level.

c. A decrease in the price of Internet service providers will expand demand of computers. That is because Internet service providers and computer are complementary goods. A decline in the price of Internet service providers, causes an increase in the demand of computers.

d. A decrease in the price of semiconductors will expand demand of computers, because semiconductors is a necessary material for a computer. So that a decrease price of semiconductors will expand the demand of computers.

e. The expectation of future price will influence the current demand of computer, so if consumers think there is a discount before Christmas, the current demand of computers will decrease.

2.

a. Based on the demand curve, X is a normal good. Because the coefficient is positive, means increases in income result in increase in the demand, and the demand of inferior goods will decrease when incomes increase.

b. Based on the demand curve, X and Y are substitute goods. The coefficient is positive, so the increase in the price of good Y causes the increase in the demand of good X.

c. Based on the demand curve, X and Z are complementary goods. The coefficient is negative. That means the increase in the price of goods Z result in the decrease in the demand of goods X.

d. QD=500-5PX+0.5I+10PY-2PZ

=500-5PX+0.5(30)+10(10)-2(20)

=500-5PX+15+100-40

=575-5PX

e. slop=0.2; price intercept=115

f. QD=575-5PX

=575-5(15)

=500

g.

4.

a. Based on supply curve, X and Z are complementary goods. Because the increase in the price of goods Z causes the increase in the supply of goods X.

b. QS=-200+20PX-5PI+0.5PZ

=-200+20PX-5(10)+0.5(20)

=-240+20 PX

c.

d. QS=0

0=-240+20PX

PX=12

e. QS=-240+20*(25)

=260

f.

7.

a. Because the bad weather, the environment is not benefit for growing coffee bean, which cause an increase in the price of coffee bean and coffee. After that, the supply of coffee will decrease because the lack of coffee bean and expensive price of coffee bean.

b. The change in the market for coffee beans can cause both increase and decrease on the equilibrium price and quantity of