1. In 2013, In and Out charged $6.50 for a hamburger and sold 3,000,000 of them. In 2016, although In and Out raised the price to $8.00, sales of his burgers rose to 4,000,000. Use the concepts of a shift in the demand curve versus a movement along the demand curve to explain why this increase in sales does not represent a violation of the law of demand. Provide examples and details that explain this occurrence.
2. As a result of the rapid growth of the Global economy since the early 2000's, world demand for oil has increased significantly. At the same time new technology has affected oil production and supply. Both events have had significant impacts on world oil prices. How would the simple supply and demand model apply to this case? Understand that oil prices have been both high and low over the last 10 years. Explain how these events have effected the global price of oil.
3. Imagine you are the Trump's economic advisor. He has asked you to develop a policy that can be addressed at the upcoming State of the Union Address. Trump believes in the Keynesian policy of AS/AD. Unfortunately you can't give him solid policy prescriptions based on that model because you do not know the positionon of the LAS curve. Explain why not knowing this creates a problem.
4. Assume that the marginal propensity to expend is 0.50 and therefore the multiplier is 2. According to the multiplier model, an increase in autonomous exports of 100 would raise the equilibrium level of income by 200. Explain how the multiplier process amplifies the initial shift in autonomous expenditures.