1. In December, the price of Christmas trees rises and the quantity of trees sold rises. Is this a violation of the law of demand? Explain your answer.
2. Which of the following factors will cause the demand curve for labor to shift? In which direction will this occur? Explain why your answer is correct.
(a) the demand for the product by labor declines.
(b) the prices of substitute inputs falls.
(c) the productivity of labor increases.
(d) the wage rate declines.
3. The market mechanism is the tendency for supply and demand to equilibrate, so that there is neither excess demand nor excess supply. Provide a graphical and written explanation of that statement.
4. Define the term moral hazard and apply it to the banking industry