Multiple answers may be correct. **Understanding Relationships Between Goods: Substitutes and Complements**When analyzing the relationships between two goods, it is essential to determine whether they are substitutes or complements. The following scenarios illustrate different circumstances in which goods A and B can be considered substitutes or complements based on changes in prices and quantities demanded.1. **Good A and B are substitutes.**2. **Good A and B are complements.**3. **Good A and B are substitutes because the percentage change in the price of good A is greater than the percentage change in quantity demanded of Good B.**4. **Good A and B are complements because the percentage change in the price of good A is greater than the percentage change in quantity demanded of Good B.**5. **Good A and B are substitutes because when the price of A goes up, the quantity demanded of B goes down even though the price of Good B hasn't changed.**6. **Good A and B are complements because when the price of A goes up, the quantity demanded of B goes down even though the price of Good B hasn't changed.**7. **Good A and B are complements because when the price of A goes up, the quantity demanded of B goes up even though the price of Good B hasn't changed.**8. **Good A and B are substitutes because when the price of A goes up, the quantity demanded of B goes up even though the price of Good B hasn't changed.**9. **None of the answers are correct.**In conclusion, understanding whether goods are substitutes or complements involves analyzing how changes in the price of one good affect the quantity demanded of another good. These scenarios offer a variety of perspectives to determine the nature of this relationship. ### Educational Explanation of Demand Shift#### Concept: Impact of Price Change on DemandIn economics, the demand for one good can be influenced by the price of another good. Graphs illustrating this principle help in visualizing how changes in one market can impact another.#### Scenario PresentedSuppose the change in the price of good A from $20 to $70 causes the individual's demand for good B to shift from D2 to D3.#### Graph AnalysisThis scenario is depicted in two graphs, one showing the demand curves for good A and the other for good B. Each graph has the following components:1. **Axes**: - **Horizontal Axis (Q)**: Represents the quantity of goods. - **Vertical Axis (P)**: Represents the price of goods.2. **Demand Curves**: - The demand curves are marked as D1, D2, and D3 in both graphs, representing different levels of demand. - D1 represents the initial demand, D2 is the intermediate demand, and D3 is the final demand after the price change.#### Graph Details##### Good A- Initial Situation: - **Price Levels**: Points W, X, Y, and Z mark specific price levels ($140, $90, $70, and $20 respectively). - At $20, the quantity demanded is around 70 units (point Z on D1).- Post Price Increase: - The price increases to $70, reducing the quantity demanded to about 45 units (point Y on D2).##### Good B- Initial Situation: - Similar price points: W, X, Y, and Z. - At $20, quantity demanded is around 70 units (point Z on D1).- Post Price Increase: - The price effect from Good A causes a shift in the demand curve. - Initially, at $70, the quantity demanded is around 35 units (point X on D2). - After the price increase in Good A, the demand curve shifts left to D3, where at $70, the new quantity demanded is around 10 units.#### InterpretationThe leftward shift in demand for good B from D2 to D3 indicates a decrease in quantity demanded for good B at each price level. This shift is attributed to the increase in the price of good A, showcasing how the two goods are related in terms of

The demand curve for a good is the graphical representation of the relationship between the price of…

Good A and B are substitutes. Good A and B are complements. Good A and B are substitutes because the percentage change in the price of good A is greater than the percentage change in quantity demanded of Good B. Good A and B are complements because the percentage change in the price of good A is greater than the percentage change in quantity demanded of Good B. Good A and B are substititutes because when the price of A goes up, the quantity demanded of B goes down even though the price of Good B hasn't changed. Good A and B are complements because when the price of A goes up, the quantity demanded of B goes down even though the price of Good B hasn't changed. Good A and B are complements because when the price of A goes up, the quantity demanded of B goes up even though the price of Good B hasn't changed. O Good A and B are substitutes because when the price of A goes up, the quantity demanded of B goes up even though the price of Good B hasn't changed. None of the answers are correct.

Good A and B are substitutes. Good A and B are complements. Good A and B are substitutes because the percentage change in the price of good A is greater than the percentage change in quantity demanded of Good B. Good A and B are complements because the percentage change in the price of good A is greater than the percentage change in quantity demanded of Good B. Good A and B are substititutes because when the price of A goes up, the quantity demanded of B goes down even though the price of Good B hasn't changed. Good A and B are complements because when the price of A goes up, the quantity demanded of B goes down even though the price of Good B hasn't changed. Good A and B are complements because when the price of A goes up, the quantity demanded of B goes up even though the price of Good B hasn't changed. O Good A and B are substitutes because when the price of A goes up, the quantity demanded of B goes up even though the price of Good B hasn't changed. None of the answers are correct.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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** PRACTICE TEST **
Calculate absolute and relative risk aversion for U(x)=ln(x) and U(x)=-e-x where wealth is (w)