Laws of supply and demand

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1. D&Z Dry Foods Distributions specializes in the whole distribution of dry goods, such as rice and dry beans. The firm's manager is concerned about an article he read in the morning's Wall Street Journal indicating that incomes of individuals in the lowest income brackets are expected to increase by 10 percent over next year. While the manager is pleased to see this group of individuals doing well, he is concerned about the impact this will have on D&Z Dry Foods. What do you think is likely to happen to the price of the products D&Z Dry Foods sells? Why? Explain

2. Some have argued that higher cigarette prices do not deter smoking. While there are many arguments both for and against this view, some find the following argument to be most persuasive of all: "The laws of supply and demand indicate that higher cigarette prices are ineffective in reducing smoking. In particular, higher cigarette prices will reduce demand for cigarettes. This reduction in demand will push the equilibrium price and quantity back to its original level. Since the equilibrium price remains unchanged, smokers will consume the same number of cigarettes" Do you agree or disagree with this view? Explain.

Reference no: EM1315582

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