Explain how the demand for a good is affected by the prices of its related goods. Give examples.
How much the consumer would like to buy a given commodity depends on the relative price of other related goods such as substitutes or complementary goods to a commodity.
The demand for a commodity depends on the relative prices of its substitutes. If the substitutes are relatively costly, then there will be more demand for that commodity at a given price and vice versa. Example Tea and Coffee
Similarly, the demand for a commodity is also affected by its complementary products. When in order to satisfy a given want, two or more goods are needed in combination, these goods are referred to as complementary goods. Example pen and ink
Market for a good is in equilibrium. There is an 'increase' in demand for this good. Explain the chain of effects of this change. Use diagram.
Define 'Market-supply'. What is the effect on the supply of a good when Government imposes a tax on the production of that good? Explain.
What is meant by producer's equilibrium? Explain the conditions of producer's equilibrium through the 'total revenue and total cost' approach. Use diagram.
A consumer consumes only two goods X and Y. State and explain the conditions of consumer's equilibrium with the help of utility analysis.
What is a supply schedule? What is the effect on the supply of a good when Government gives a subsidy on the production of that good? Explain.