1. Using supply and demand diagrams show the effects of the following changes on the price and quantity of cars: a) an increase in the price of petrol; b) a rise in incomes; c) a rise in wages for car workers and a fall in the price of bus tickets (both at the same time). In each case, explain the assumptions you are making about how the changes affect supply or demand. 2. Explain, using a diagram (or diagrams), why firms maximize profits where marginal …

| February 7, 2018

1. Using supply and demand diagrams show the effects of the following changes on the price and quantity of cars: a) an increase in the price of petrol; b) a rise in incomes; c) a rise in wages for car workers and a fall in the price of bus tickets (both at the same time). In each case, explain the assumptions you are making about how the changes affect supply or demand. 2. Explain, using a diagram (or diagrams), why firms maximize profits where marginal …

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