Rennie chpt 4 answers
Pg 51
d) Explain the difference between an increase in quantity demanded and an increase in demand.
An increase in quantity demand is caused by a decrease in a specific price (shown as a movement along the demand
curve)
An increase in demand is caused by factors other than price, e.g. decrease in direct tax, increase in the price of a
substitute. An increase in demand will result in the demand curve shifting to the right because there is an increase in
quantity demanded at each and every price.
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Pg 60
d) Explain TWO flow-on effects a decrease in the price of a new car may have on a consumer.
* note – your description and explanation must be specific to the context (purchase of a new car).
When price decreases, a consumer is more likely to buy a new car. They may find that the car will break
down less often; will be more reliable and have a higher safety rating, so they are able to travel for a longer
distance and may feel more comfortable and safer in it than in an older or rental car. This will help to
reduce their spending, in the long term, on maintenance or repairs of the car.
Another flow on effect since consumers are buying new cars, is that they may buy complements to use
with the new car such as a GPS, roof racks, or upgrade their sound system, or buy new insurance for the
car. Thus consumer spending on the new car and on the complements will increase.
Pg 63 Please check your answer for this question.

A DVD movie rental and pizza are complements because they are used in conjunction with each
other (described, definition used). Hal likes to eat a pizza while he watches a DVD rental movie
(explained).

As price of DVD movie rental falls from P1 to P2, quantity demanded by Hal increased from Q1 to
Q2. Since he likes to eat a pizza he is watching a movie, his demand for pizzas will increase because
he is renting more movies. His demand for pizza will shift to the right from D to D1 showing that
more pizza is purchased at each and every price.