Dominick Salvatore Schaums Outline of Microeconomics, 4th edition Schaums Outline Series 2006

26 DEMAND, SUPPLY, AND EQUILIBRIUM: AN OVERVIEW [CHAP. 2
(b)
In Fig. 2-11 (a), we see that when the price of coffee rises; from 40¢ to 60¢ per cup (with everything else
affecting the demand for coffee remaining the same), the quantity demanded of coffee falls from 50 to 30
cups per month. This is reflected by a movement along the individual’s demand curve for coffee in an
upward direction. Since tea is a substitute for coffee, the increase in the price of coffee causes an upward
shift in the hypothetical demand curve for tea, from d to d 0 in Fig. 2-11(b). Thus, with the price of tea remaining
at 20¢ per cup, the individual’s consumption of tea increases from 40 to 50 cups per month.
2.8 The values in Table 2.12 refer to the change in an individual’s consumption of lemons and tea at home
when the price of lemons rises (everything else, including the price of tea, remains the same). (a) Draw a
figure showing these changes, and (b) explain the figure drawn.
Table 2.12
Before
After
Price
(cents/unit)
Quantity
(units/month)
Price
(cents/cup)
Quantity
(units/month)
Lemons 10 20 20 15
Tea 20 40 20 35
(a)
Fig. 2-12
(b)
In Fig. 2-12(a), we see that when the price of lemons rises from 10¢ to 20¢ each (with everything else affecting
the demand for lemons remaining the same), the quantity of lemons demanded falls from 20 to 15 per month.
This is reflected by a movement along the individual’s demand curve for lemons in an upward direction. Since
lemons are a complement of tea for this individual, the increase in the price of lemons causes a downward
shift in the hypothetical demand curve for tea, from d to d 00 in Fig. 2-12(b). Thus, while the price of tea
remains at 20¢ per cup, the individual’s consumption of tea decreases from 40 to 35 cups per month.
2.9 (a) On one set of axes, draw the individual’s hypothetical demand curve for tea (1) before the price of
coffee and the price of lemons increased as in Problems 2.7 and 2.8, (2) after only the price of coffee
rose as in Problem 2.7, (3) after only the price of lemons rose as in Problem 2.8 and (4) after both the
price of coffee and the price of lemons rose as in Problems 2.7 and 2.8.
(b) Explain the completed graph.