Over the past 40 years, technological advances have reduced the cost of computer chips. Explain how this affected the market for computers and the market for typewriters (provide a diagram in each case) (hint: realize that a computer chip is an input into the production of computers, which makes supplying the computer cheaper... and also realize what typewriter is to computers.

2) Headphones and mobile phones are complements because they are often used together. When the price of mobile phones rises, what happens to the supply, demand, quantity supplied, quantity demanded and the price in the market for headphones?

3) Indicate whether the following statement is TRUE or FALSE and explain your answer: An increase in the price of electric cars will lead, other things equal, to a decrease in the equilibrium price of cars using petrol.

4) MULTIPLE CHOICE (identify the one best answer below and explain your reasoning for each option):

If the economy experiences a boom and incomes rise substantially, what happens in the markets for both normal and inferior goods?

a. In both markets, prices fall, quantities rise.

b. In both markets, prices and quantities both fall.

c. In both markets, prices rise, quantities fall.

d. In one market both prices and quantities rise, in the other both prices and quantities fall.

e. None of the above.