ECON 262

In Class Exercise Five - The Demand Curve

1.  What are the variables in the demand function (what variables influence demand)?

2.  Graphically show what will happen to demand or quantity demanded in each case.  Assume ceteris paribus unless otherwise stated.   LABEL AXES CORRECTLY - NO X'S PLEASE.

a. What will happen to demand or quantity demanded of wheat if the price of wheat increases?

b. Assume bread and butter are complements.  What will happen to the demand or quantity demanded of bread if the price of butter increases?

c.  Assume oranges and apples are substitutes.  What will happen to the demand or quantity demanded of oranges if the price of apples decreases?

d.  Assume motorcycles are an inferior good.  What will happen to the demand or quantity demanded of motorcycles if the income of people increases and at the same time the price of cars (a substitute for motorcycles) increases?

e.  Assume 6 new consumers enter the milk shake market.  What will happen to the demand for milk shakes?

3. What questions do you still have about this material?