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Do you agree or disagree with each of the following statements? Briefly explain your answers and illustrate each with supply and demand curves.
1. The price of a good rises, causing the demand for another to fall. Therefore, the two goods are substitutes.
2. A shift in supply causes the price of a good to fall. The shift must have been an increase in supply.
3. During 2009, incomes fell sharply for many Americans. This change would likely lead to a decrease in the prices of both normal and inferior goods.
4. Two normal goods cannot be substitutes for each other.
5. If demand increases and supply increases at the same time, prices will clearly rise
6. The price of a good A falls. This causes an increase in the price of good B. Therefore goods A and B are complements.
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