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Supply and Demand - USC Price SCHOOL OF PUBLIC POLICY

A homework assignment in economics focused on supply and demand principles at USC Price School of Public Policy.

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    USC Price SCHOOL OF PUBLIC POLICY PPD501ab | Economics for Policy, Planning, and Development 1 Supply and Demand - USC Price SCHOOL OF PUBLIC POLICY Week 01 Assignment 01 Supply and Demand 1. For each of the following, illustrate the impact of the event on a supply and demand diagram. You will shift either supply or demand. Label your graphs carefully. a. Television Market: The advent of HDTV, or high definition television, makes traditional televisions less desirable. What happens to the price of traditional televisions? The quantity of traditional TV’s sold? Explain. (5 points) • Impact : The arrival of HDTV (high - definition television) makes traditional televisions less appealing . This would decrease the demand for traditional TVs, shifting the demand curve to the left1. • Price and Quantity : This leftward shift in the demand cur ve results in a lower equilibrium price and a lower quantity of traditional TVs sold b. Milk Market: The fall in the prices of breakfast cereals has led to increased consumption of cereal. What effect would this have on the price of milk and the quantity consumed? Explain. (5 points) • Impact : A fall in the price of breakfast cereals leads to increased cereal consumption. Because cereal and milk are often consumed together (complementary goods), the demand for milk increases1. This causes the demand curve for milk to shift to the right • Price and Quantity : The rightward shift in the demand curve results in a higher equilibrium price and a higher quantity of milk consumed7 c. New Cars: American incomes have been rising during the recovery since the last recession. What effect would this increase in income have on the market for new cars? Explain. (5 points)

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