Assignment:
1. What effect should each of the following have on the demand for gasoline in a competitive market? State what happens to demand. Explain your reasoning in each case and relate it to a demand determinant.
(a) an increase in the number of cars
(b) the economy moves into a recession
(c) an increase in the price of car insurance, taxes, maintenance
(d) consumer expectations of substantial price increases in gasoline
2. What effect will each of the following most likely have on the supply of corn in a competitive market? State what happens to supply. Explain your reasoning in each case and relate it to a supply determinant.
(a) the development of an improved corn seed that resists drought conditions
(b) an increase in the price of soybeans which can also be planted on land used for growing corn
(c) an increase in government payments for growing corn
(d) an increase in the price of fertilizer