Chap 10 - Price changes

What are the causes for price changes?

Changes in non-price factors that affect demand or supply (TWO TIPS and HIS AGE) will cause a change in the equilibrium price and the quantity traded.

What will happen if a sales tax is increased for tobacco products?

The tax imposed on tobacco products will shift the supply curve of such products to the left. This raises the market equilibrium price.

It can represent any factor that shifts the supply curve to the left.

What will happen if there is a favourable weather condition that could shift the agricultural output to the right?

It will reduce the equilibrium price, also increasing the quantity traded.

A brand has just published a new product. They advertise it nicely, gaining popularity. Will the price increases?

Yes. If the quantity demandedshifts to the right, then the price will rise.

Pink sauce is known for its terrible side effects, as well as tasting horrible. Due to this, the demand had gone lower than ever. What will happen to the price?

Due to it’s negative publicity, the price will decrease, since the demand is low.