Microeconomics

Chapter #2: (50–points)

1. Why is the demand curve downward sloping? Explain. (5–points)
2. Demonstrate graphically and explain verbally the difference between an increase in the quantity
demanded and an increase in demand. Describe what might have caused each to occur. (15–points)
3. Your boss told you that a decrease in price would increase demand. Why is your boss wrong? (5–points)
4. Briefly explain the six determinants of market supply. (5–points)
5. Explain how a market adjusts to an increase in the supply of a product. (5–points)
6. Assume the market demand for coffee is initially in equilibrium. Complete the following: (15–points)
a. Draw a demand and supply diagram to illustrate the initial equilibrium.
b. Explain the impact on the coffee market if there is an increase in the price of coffee beans.
c. Graphically illustrate the impact of a price increase of coffee beans on the diagram from (a