Assignment:
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?
2. Explain how the following factors will shift the demand curve for Gillette shaving cream.
a. The price of a competitor's shaving cream increases.
b. With an increase in unemployment, the average level of income in the economy falls.
c. Shaving gels and foams, marketed as being better than shaving creams, are introduced in the market.
3. Note: This problem requires some bask algebra. The demand for computers is QD = 15 - 2P, where P is the price of computers. Initially, the supply of computers is Qs = P.
a. Find the original equilibrium price and quantity.
b. Suppose the prices of memory chips and motherboards (two important components in computers) rise and as a consequence, the supply curve for computers becomes Qs = -3 + P. Find the new equilibrium price and quantity.