Question

Which of the following would result in a leftward shift in the supply curve for good X can be

        attributed to

       a. an increase in the price of an input used in the production of the good X.

       b. an increase the price of a substitute good in production.

       c. an increase in the price of good X.

       d. an increase in the price of a complementary good in production.

       e. more than one of these choices

Which of the following would result in a rightward shift of the demand curve for good X?

      a. a decrease in the price of a substitute good (in consumption).

      b. an increase in the price of a complementary good (in consumption).

      c. a decrease in expected future price.

      d. more than one of the above.

      e. none of these choices are correct

     Consider the market for existing homes, a decrease in the expected price of existing homes can

               be expected to:

1. Cause the supply curve to shift right today, raising market price.
2. Cause the demand curve to shift left today, raising market price.
3. Cause supply to shift left and demand to shift left with an ambiguous

effect on market price.

4. Cause supply to shift left and demand to shift right, causing market price to

rise.

5. none of these choices are correct

Answer 1

1) Option E. When an input is expensive it raises cost of production. This decreases the supply and so the supply curve shifts to the left. When the substitute is expensive more resources are used in its production so the production of the other good is reduced

2) Option E. All of these options will decrease the demand. Hence demand curve will shift left

3) Option E. Supply of existing homes is fixed so it cannot change. Demand would decrease as people postpone their decision. But this shifts demand curve to the left and reduce the market price.