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Supply and Demand - USC Price SCHOOL OF PUBLIC POLICY

A homework assignment in economics focused on supply and demand principles at USC Price School of Public Policy.

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USC PriceSCHOOL OF PUBLIC POLICYPPD501ab | Economics for Policy, Planning, and Development1Supply and Demand-USC Price SCHOOL OF PUBLIC POLICYWeek 01 Assignment 01Supply and Demand1.For each of the following, illustrate the impact of the event on a supply and demanddiagram. You will shifteithersupply or demand. Label your graphs carefully.a.Television Market: The advent of HDTV, or high definition television, makestraditional televisions less desirable. What happens to the price of traditionaltelevisions? The quantity of traditional TV’s sold? Explain. (5 points)•Impact: The arrival of HDTV (high-definition television) makes traditional televisions lessappealing.This would decrease the demand for traditional TVs, shifting the demandcurve to the left1.•Price and Quantity: This leftward shift in the demand curve results in a lowerequilibrium price and a lower quantity of traditional TVs soldb.Milk Market: The fall in the prices of breakfast cereals has led to increasedconsumption of cereal. What effect would this have on the price of milk and thequantity consumed? Explain. (5 points)•Impact: A fall in the price of breakfast cereals leads to increased cereal consumption.Because cereal and milk are often consumed together (complementary goods), thedemand for milk increases1. This causes the demand curve for milk to shift to the right•Price and Quantity: The rightward shift in the demand curve results in a higherequilibrium price and a higher quantity of milk consumed7c.New Cars: American incomes have been rising during the recovery since the lastrecession. What effect wouldthis increase in income have on the market for newcars? Explain. (5 points)

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