Cambridge International as and a level Economics Ebook

SELF-ASSESSMENT TASK 
2.16
Draw diagrams and briefl y explain how you expect 
changes in the following to infl uence the position of 
the demand curve for PCs:
a 
an increase in interest rates
b 
a large increase in unemployment
c 
a sustained rise in earnings from work
d 
a reduction in income tax.
SELF-ASSESSMENT TASK 
2.17
Would you classify the following products as 
normal goods or inferior goods? In each case draw 
a diagram to show how a decrease in income will 
shift the demand curve. Explain your reasoning. 
What diffi
culties did you have in deciding? What 
information would you need to resolve these 
diffi
culties?
a 
premium brand orange juice
b 
hotel accommodation
c 
standard TV sets
d 
orange cordial
e 
guesthouse accommodation
f 
HD fl at-screen satellite TVs.
The price and availability of related products
In the case of substitute products, a change in the 
price, availability and even the attractiveness of one 
product will have an impact on the demand for all 
substitute goods. If the price rises, then the demand 
for substitutes will increase as consumers switch their 
demand to the relatively cheaper products. Equally, 
a health scare, for example involving chicken, will 
invariably lead to an increase in demand for a close 
substitute such as duck or pork. In both of these cases, 
the demand curve for chicken will shift to the left . It will 
shift to the right if the price of substitutes increases or 
if there is a positive report in the media of the health 
benefi ts of the product.
For complements, a rise in the price of one product 
will reduce the quantity demanded for it and its 
associated product. Conversely, a fall in price will lead 
to an increase in the quantity demanded and will also 
lead to an increase in demand for its complement. Th
e 
outcome for both situations is a shift to the right of the 
demand curve.