Q. 4 - Problems In the market for portable power... [FREE SOLUTION]

Chapter 3: Q. 4 - Problems (page 72)

In the market for portable power banks(a normal good), explain whether the following events would cause an increase or a decrease in demand or an increase or decrease in the quantity demanded. Also, explain what happens to the equilibrium quantity and the market-clearing price.
a. There is an increase in the price of carry cases for portable power banks.
b. There is a decrease in the price of devices used to charge portable power banks.
c. There is an increase in the number of consumers of portable power banks.
d. A booming economy increases the income of the typical buyer of portable power banks.
e. Consumers of portable power banks anticipate that the price of this good will decline in the future.

Expert verified

1. Demand falls

2. Demand rises

3. Demand rises

4. Demand rises

5. Demand falls

Demand refers to the overall demand curve or the demand function which establishes the relationship between price and quantity demanded.

Quantity demanded is a single point corresponding to a price which indicates how much quantity is demanded.

1. Demand falls due to rise in prices of complementary goods, supply remains same, hence market clearing price and equilibrium quantity falls.

2. Demand rises as the price of complementary good has fallen, leading to increase in market clearing price and equilibrium quantity.

3. Demand rises as the number of consumers increase, leading to increase in market clearing price and equilibrium quantity.

4. Demand rises as the income in hand increase, leading to increase in market clearing price and equilibrium quantity.

5. Demand falls as people expect the prices to fall further in future. Market clearing price will hence fall and the quantity demanded will fall too.

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