Exercise 1
In this exercise, we will analyze the demand curve in the market of tomatoes. In each question below, your task is to provide a graphical analysis accompanied by an explanation.
Treat each question separately.
a) It was discovered that tomatoes provide larger health benefits than previously assumed. What is going to happen with the demand curve?
b) Looking for better opportunities abroad, 5% of country’s population emigrated to another country. What is going to happen with the demand curve?
c) Assume that tomato is a normal good. Assume also that people use tomato mostly as an ingredient for sandwiches. Due to an economic boom, consumers’ incomes have increased. At the same time, the price of bread has significantly increased. What is going to happen with the demand curve?
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