Question

Answer true or false, and if the statement is false, change it to make it true. Illustrate your answers on a demand and supply graph. a. An increase in demand is represented by a movement up the demand curve. b. An increase in supply is represented by a movement up the supply curve. c. An increase in demand without any changes in supply will cause the price to rise. d. An increase in supply without any changes in demand will cause the price to rise.

Short answer

a. An increase in demand is represented by a movement up the demand curve. b. An increase in supply is represented by a movement up the supply curve. c. An increase in demand without any changes in supply will cause the price to rise. d. An increase in supply without any changes in demand will cause the price to rise. Answer: c. An increase in demand without any changes in supply will cause the price to rise.

Step-by-step solution

a. Statement Analysis

The statement claims that an increase in demand is represented by a movement up the demand curve. This statement is false. An increase in demand is actually represented by a rightward shift in the entire demand curve, not just a movement up a fixed curve.

a. Demand Graph Illustration

To illustrate the true scenario for an increase in demand, follow these steps: 1. Draw two axes: Price (P) on the vertical axis and Quantity (Q) on the horizontal axis. 2. Draw a downward-sloping demand curve D1. 3. To show an increase in demand, draw a new demand curve D2, shifted to the right from D1. Do not move up on the original demand curve.

b. Statement Analysis

The statement claims that an increase in supply is represented by a movement up the supply curve. This statement is false. An increase in supply is actually represented by a rightward shift in the entire supply curve, not just a movement up a fixed curve.

b. Supply Graph Illustration

To illustrate the true scenario for an increase in supply, follow these steps: 1. Draw two axes: Price (P) on the vertical axis and Quantity (Q) on the horizontal axis. 2. Draw an upward-sloping supply curve S1. 3. To show an increase in supply, draw a new supply curve S2, shifted to the right from S1. Do not move up on the original supply curve.

c. Statement Analysis

The statement claims that an increase in demand without any changes in supply will cause the price to rise. This statement is true.

c. Price Increase Illustration

To illustrate the true scenario for an increase in demand causing a price rise, follow these steps: 1. Draw two axes: Price (P) on the vertical axis and Quantity (Q) on the horizontal axis. 2. Draw a downward-sloping demand curve D1 and an upward-sloping supply curve S1. The intersection between D1 and S1 represents the initial equilibrium price (P1) and quantity (Q1). 3. Draw a new demand curve D2, shifted to the right from D1, to represent an increase in demand. 4. The new intersection between D2 and S1 represents the new equilibrium price (P2) and quantity (Q2). The difference between P2 and P1 will indicate the increase in price due to the increase in demand.

d. Statement Analysis

The statement claims that an increase in supply without any changes in demand will cause the price to rise. This statement is false. An increase in supply without any changes in demand will actually cause the price to decrease, not rise.

d. Price Decrease Illustration

To illustrate the true scenario for an increase in supply causing a decrease in price, follow these steps: 1. Draw two axes: Price (P) on the vertical axis and Quantity (Q) on the horizontal axis. 2. Draw a downward-sloping demand curve D1 and an upward-sloping supply curve S1. The intersection between D1 and S1 represents the initial equilibrium price (P1) and quantity (Q1). 3. To show an increase in supply, draw a new supply curve S2 shifted to the right from S1, with demand curve D1 unchanged. 4. The new intersection between D1 and S2 represents the new equilibrium price (P2) and quantity (Q2). The difference between P1 and P2 will indicate the decrease in price due to the increase in supply.