Question one

1. Do you agree or disagree with each of the following statements? Briefly explain your answers with examples.

a. The price of goods rises, causing the demand for another good to fall. Therefore, the two goods are substitutes. b. A shift in supply causes the price of a good to fall. The shift must have been an increase in supply. c. During 2009, incomes fell sharply for many consumers. This change would likely lead to a decrease in the prices of both normal and inferior goods. d. If demand increases and supply increases at the same time, the price will clearly rise. e. The price of good A falls. This causes an increase in the price of good B. Therefore, goods A and B are complements.