Question

Variables typically included in a multivariate demand function (other than the price and quantity of the item

the demand function represents) are consumer tastes and preferences, the number of buyers, spendable (disposable) income, prices of substitute goods, prices of complementary goods, advertising expenditures, weather, and expectations. Recalling that the price of the item being considered is placed on the vertical axis, and the quantity on the horizontal axis, the other variables are termed demand shifters. Please answer the following questions about the affect changes in other variables might have on the demand for the item. These changes will either cause demand to increase (shift right) or decrease (shift left). Use either word as applicable, for the short answer.

1. If the number of potential consumers for the good being considered decreases, then the demand for the good being considered will likely ___decrease___.

2. If I increase the advertising expenditures for a good, then I really hoping to ______________ the demand for it.


3. If a good is a normal good, an income decrease should

result in a demand ______________ .

4. If the demand for a good decreases, then the demand for its complement should _________________ .

5. If the quantity demanded of a good decreases because of an increase in the price of it, then the demand for its lower priced substitute should ___________________..

Variables typically included in a multivariate supply function (other than the price and quantity of the item the supply function represents) are prices of other goods that use similar input resources for production, expectations, the number of suppliers, techniques of production, taxes and subsidies, prices of input resources, and weather. Please answer the following questions about the affect changes in other variables might have on the supply of the item. These changes will either cause supply to increase (shift right) or decrease (shift left). Use either word as applicable, for the short answer.

1. A minimum wage increase causes an increase in the costs of production. Assuming the minimum wage increase cannot be passed on to consumers as price increases, minimum wage increases will _______________ the supply of goods.

2. An increase in the number of suppliers of a good should ______________ the supply of the good.

3. Have you noticed that whenever there is a hailstorm, the supply of roofers _______________.

4. To the extent that free college tuition ______________ the supply of college degree holders relative to the demand for the them, starting salaries of degree holders will decrease.

5. If you wish to ___________ the supply of a good, then subsidize it.

Answer 1

Various factors termed as demand shifters and supply shifters can significantly influence the demand and supply curves for goods and services. These include the number of consumers, advertising, income levels, and production costs. Shifts in demand or supply can be represented graphically and can impact the market equilibrium.

Step-by-step explanation:

When examining how different variables affect the demand and supply of a good, it's important to understand that these factors are known as demand shifters and supply shifters. For instance, if the number of consumers decreases, we would expect the demand for a good to decrease. In contrast, an increase in advertising is typically intended to increase demand for a product. For a normal good, a decrease in income would lead to a decrease in demand. If the demand for a good declines, the demand for its complements is also likely to decrease. If the price of a good increases, leading to decreased quantity demanded, the demand for a lower-priced substitute is expected to increase.

Concerning supply, an increase in the cost of production, such as a rise in minimum wage without the ability to pass on these costs to consumers, would decrease the supply of goods. Conversely, an increase in the number of suppliers should increase the supply of a good. Similarly, the supply of specific services, such as roofing services after a hailstorm, tends to increase due to heightened demand. The availability of subsidies is also a method to increase the supply of a good.

These factors highlight the complexity of the market and how various external factors can shift demand and supply curves, influencing the market equilibrium.