Problem Set 2 ̶ Supply and Demand Question 1 What is meant by
holding all else equal How is this concept used when discussing movements along the demand curve How is this concept used when discussing movements
along the supply curve Question 2 What is meant by diminishing marginal benefits Are you likely to experience diminishing marginal benefits for goods that you like a lot Are there exceptions to the general rule of diminishing marginal benefits (
Hint: think about batteries that you would use in a flashlight that requires two batteries) Explain your answer.
Question 3 How is the market demand schedule derived from individual demand schedules How does the market demand curve differ from an individual demand curve
Question 4 Explain how the following factors will shift the demand curve for Gillette shaving cream.
• The price of a competitor’s shaving cream increases.
• With
an increase in unemployment, the average level of income in the economy falls.
• Shaving gels and foams, marketed as being
better than shaving creams, are introduced in the market.
Question 5 What does it mean to say that we are running out of cheap oil What does this imply for the price of oil in the future
Question 6 What does the Law of Supply state What is the key feature
of atypical supply curve Question 7 What is the difference between willingness to accept and willingness to pay Fora trade to take place, does the willingness
to accept have to be lower, higher, or equal to the willingness to pay
Question 8 Explain how the following factors will shift the supply curve for sparkling wine a. New irrigation technology improves the average yield of a vineyard. b. Following an increase in the
immigration of unskilled labor, the wages of wine-grape pickers fall. c. The government sets a minimum wage for seasonal employment.
Question 9 How do the following affect the equilibrium price in a market a. A leftward shift in demand b. A rightward shift in supply c. A large rightward shift in demand and a small rightward shift in supply d, A large leftward shift in supply and a small
leftward shift in demand 
