Problem Set 1
In January 2014 the price of a 2014 Buick was $20,000 and 50,000 units were sold. At October 2014, the price of a 2014 Buick dropped to $18,000 and 60,000 units were sold.
- Identify what has happened in the market for Buicks in the context of demand.
- Show that you have a deeper understanding – based on your explanation in question 1, distinguishing between change in quantity demanded and change in demand.
- Enumerate the factors that may cause a change in quantity demanded and change in demand (list three).
- Assess how one of the three factors that can cause a change in demand would affect the demand for Buick. Explain it.
- Scrutinize (Scrutinize means examine or inspect carefully) what would happen to the demand for Buicks if there is an increase in income (remember the definition of a normal good and inferior good).