All exercises are available on MyEconLab; * = [&|eq|&] answer at the back of this book.

1. Demand

  1. *1.1 Does an increase in average income cause a shift of the demand curve for coffee or a movement along the demand curve? Explain briefly.

  2. 1.2 Given the estimated demand function Equation 2.2 for coffee, Q = 8.5 p + 0.1 Y +1, [&Q|=|8.5|-|p|+|0.1Y,&] use algebra (or calculus) to show how the demand curve shifts as per capita income, Y, increases by $10,000 a year. Illustrate this shift in a diagram.

  3. 1.3 Assume that both the U.S. and Canadian demand curves for lumber are linear. The Canadian demand curve lies inside the U.S. curve (the Canadian demand curve hits the axes at a lower price and a lower quantity than the U.S. ...

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