2010chpt3_answers书籍.pdf

Demand, Supply, and Market Equilibrium ANSWERS TO END-OF-CHAPTER QUESTIONS 3-1 Explain the law of demand. Why does a demand curve slope downward? How is a market demand curve derived from individual demand curves? As prices change because of a change in supply for a commodity, buyers will change the quantity they demand of that item. If the price drops, a larger quantity will be demanded. If the price rises, a lesser quantity will be demanded. The demand curve slopes downward because of diminishing marginal utility, and the substitution and income effects. Because successive units of a good provide less additional utility than the previous units, buyers will only pay for these smaller amounts of utility if the price is lowered. When the price of a commodity decreases relative to that of substitutes, a buyer will substitute the now cheaper commodity for those whose prices have not changed. At the same time, the decreased price of the commodity under discussion will make the buyer wealthier in real terms. More can be bought of this commodity (as well as of others whose prices have not changed). Thus, the substitution and income effects reinforce each other: More will be bought of a normal (or superior) commodity as its price decreases. On a graph with price on the vertical axis and quantity on the horizontal, this is shown as a demand curve sloping downward from left to right. The market demand curve is derived by horizontally summing the individual demand curves. 3-2 What are the determinants of demand? What happens to the demand curve when each of these determinan