Styles Figure 1 Figure 2 So pl po Po pl Figure 3 Figure 4 po

Styles Figure 1 Figure 2 So pl po Po pl Figure 3 Figure 4 po pl

Solution

1 [a]. Apple can be think of as a substitute for orrange. If price of apple increases due to any reason, people would tend to buy more orranges and less apple, ie demand for oranges increases. In this case, demand curve would shift to right, as more quantity is demanded for the same price. On the other hand, supplier would be willing to produce more apple than orrange, as they see the price and revenue. Figure 5 best represent the outcome in which Demand curve shifts to right and Supply curve shifts to left, simultaneously without making an intermediate equilibrium.

Note: It is not mentioned whether increase in the substitute is known by who at what time, and whether suppliers are domestic or knows the price of apply. In case they so not know the increase in price of apple, only demand curve shifts left, and outcome would be represented by Figure 1. In case the supplier didn\'t knew immediately that price of apple increased, the demand would increase, makind an intermediate equilibrium; but after some time the supplier knew that, the supply decrease and the supply curve would shift left, and outcome would be represented by Figure 15. Also, Figure 16 is opted out as it is definite that in any case, demand would react either along with or more faster than supply, and not after the supply is decreased.

1 [b]. Land can be considered as an input to production, and as its price increases, so does the cost of production. As cost of production increases, supply curve would shift to left/up, as at the same price less quantity would be supplied due to increase in cost and the demand curve is unaffected. Figure 4 best represents the outcome in which supply curve shifts left/up and price increase, while quantity decrease.

1 [c]. As productivity of another input increases, at the sae cost - more output can be produced. It can also be said as well that the cost of production decreases, meaning the same. Anyhow, the supply curve will shift to right/down as more can be supplied at the same price, while demand remains the same. Figure 3 best represents the outcome in which supply curve shifts right/down and preice decreases while quantity increases.

1 [d]. As population increases, so does the demand of quantity per price. In this case, the demand curve shifts right/up, while supply curve remains the same. Firgure 1 best represents the outcome in which demand shifts right, and price-quantity both increases.