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QUESTION:
he following graph plots the market for gyros in Detroit, where there are always over 1,000 gyro trucks. Suppose the price of french fries decreases. (Assume that people regard gyros and french fries as complements.)
Show the effect of this change on the market for gyros by shifting one or both of the curves on the following graph, holding all else constant.
Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther.
Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther.

ANSWER:

The following graph plots the market for gyros in Detroit, where there are always over 1,000 gyro trucks. Suppose the price of french fries decreases. (Assume that people regard gyros and french fries as complements.)
Show the effect of this change on the market for gyros by shifting one or both of the curves on the following graph, holding all else constant.
Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther.
Points:
1 / 1
Close Explanation
Explanation:
Gyros and french fries are complementary goods because people like to consume them together. When the price of french fries decreases, it becomes less costly to consume french fries and gyros together. Therefore, people increase their consumption of gyros at any given price. Consequently, the demand for gyros increases, and the demand curve shifts to the right. Notice that it is the price of french fries, rather than the quantity demanded of french fries, that changes the demand for gyros.
Note that the supply curve does not shift because none of the factors affecting supply have changed. In particular, the supply curve shifts in response to changes in the following:
Factors Affecting Supply
•Price of inputs
•Production technology
•Number of producers
•Expectations of producers
Now suppose Congress passes a new tax that decreases the income of Detroit residents.
If gyros are a normal good, this will cause the demand for gyros todecrease  Correct .
Points:
1 / 1
Close Explanation
Explanation:
The demand for normal goods increases when income increases; that is, an increase in income causes an increase in the demand for gyros. On the other hand, a decrease in income causes a decrease in the demand for the good. Because you are told that the new tax decreases the income of Detroit residents, this causes demand to decrease, or shift to the left.

Posted by Cleveland on August 30, 2024
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