1. What does a demand curve illustrate? What will cause a demand curve to shift? Provide two examples from the automobile market where the demand for automobiles expands. A demand curve illustrates the demand schedule, which is an inverse relationship between the price of an item and the quantity demanded. As the price of an item drops, the quantity demanded will increase. A shift in the demand curve is caused by either an increase or decrease in product demand (Miller, 2016). A shift in demand for the automobile market can be caused by many different causes. As consumer income rises, demand increases for normal items. Customer expectations can also cause a shift in the demand curve. If customers think that SUVs will no longer be available in the future, customers will rush to purchase one before they are unavailable and demand will increase (Miller, 2016). 2. …show more content…
Explain the term Opportunity Cost. What is the opportunity cost of your decision to enroll in college? Opportunity Cost is defined as the highest-valued, next best alternative that must be sacrificed to obtain something or to satisfy a want (Miller, 2016). Sacrifices must be made because of scarcity, which means that there are not enough resources for a person to have everything they want (Miller, 2016). The opportunity cost of my decision to enroll in college is a reduction in personal time. Making time to study has reduced the amount of time that I have available to spend time with friends and family. On occasion, my opportunity cost shifts to a monetary cost. Overtime hours are available infrequently, but it’s usually during a week when I’m enrolled in school and unable to make the time commitment to spend the extra time at work. As such, I lose the extra wages that I would otherwise earn. 5. Differentiate between Absolute Advantage and Comparative Advantage. Is it necessary for a country to have absolute advantage in the production of a good to have comparative advantage in it? Explain your