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Question 4

 The following events occur one at a time in the market for Caribbean cruises.

i. Caribbean cruises become more popular.ii. The price of a Caribbean cruise rises.iii. The price of a cruise to Asia falls.iv. People expect the price of a Caribbean cruise to fall next season.

a) Explain the eect of each event on the demand for Caribbean cruises.

b) se a graph to illustrate the eect of each event.

c) !oes an" event #or events) illustrate the law of demand$

a) Explain the eect of each event on the demand for Caribbean cruises.

i. Caribbean cruises becoming more popular re%ects a change inpreferences. The demand for cruise increases so the demand curve shiftsrightward.

ii. The rising of price of Caribbean cruise decreases the &uantit" of cruisesdemanded. There is a movement up along the demand curve.

iii. Cruises to Asia are substitutes for cruises to the Caribbean #oppositedirection). The fall in the price of a cruise to Asia decreases the demandfor Caribbean cruises and the demand curve shifts leftward.

iv. People expecting the price of a Caribbean to fall next season' so less

people would bu" tickets for this season. The fall in the expected futureprice decreases the demand toda" so the demand curve shifts leftward.

b) se a graph to illustrate the eect of each event.

i. Caribbean cruisesbecoming morepopular re%ects achange inpreferences. Thedemand increasesand the demand

curve shifts rightwardfrom !( to !.

iii. Cruises to Asia aresubstitutes for cruises in theCaribbean. The fall in the priceof a cruise to Asia decreasesthe demand for Caribbeancruises and the demand curveshifts leftward from !( to !*.

iv. People expecting the price of a Caribbean to fall next seasondecreases the number of people who want to take a cruise this season.

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 The fall in the expected future price decreases the demand toda" sothe demand curve shiftsleftward' from !( to !*

ii. The price of a cruise rising decreasesthe &uantit" of cruises demanded. There isa movement up along the demand curve#illustrated b" the arrow). This changere%ects the law of demand.

c) +n given cases onl" the second will illustrate ,aw of !emand. -nl" the changes inprice can eect ,aw of !emand.

Question 5

 Table indicates how man" thousands of containers of ice cream three dierentcompanies are willing to produce at dierent prices.

a) !oes this information re%ect the law of suppl"$ h" or wh" not$According to The ,aw of /uppl"' other things remaining the same' if priceincrease' the &uantit" supplied increase and if price decrease' the &uantit"supplied decreases. The given case illustrates the law of suppl" because theprice per half gallon of ice cream decreased from 0 to 1' so &uantit" supplied

of 2en 3 4err"5s decreased from 6 to (' 7aagen !aas from 8( to *( andEd"5s from ( to 0.

b) hat is the market suppl" of ice cream$

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9arket suppl" is a sum of the supplies of all sellers in the market.

Price(dollars per half 

gallon)

Market supply

0 :6

: 1;1 80

Question 6

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ii. The new robot technolog" lowers thecost of producing !=!s and increasesthe suppl" of !=!s. The suppl" curveshifts rightward from /( to /.

iv. +f the price of a !=! isexpected to rise next "ear'suppl" decreases now. Thesuppl" curve of !=!s shiftsleftward from /( to /*.

vi. +f the wage rate paid to !=!factor" workers increases' thesuppl" of !=!s decreasesbecause the price of a resourceused to produce !=!s has risen.

 The suppl" curve shifts leftwardfrom /( to /*.

iii. hen the price of a !=!falls from P- to P' the&uantit" of !=!s supplieddecreases and there is amovement down along thesuppl" curve of !=!s from?( to ?.

c) -nl" the third event illustrates the law of suppl"' because onl" there thechanges in price were involved.