Question 1: Using supply and demand analysis, explain and illustrate graphically the effect of the following situations.

Population growth surges rapidly;

The prices of resources used in the production of good X increases;

The government is paying a $1 per unit subsidy for each unit of good Y produced.;

The income of consumers of normal good X increases;

The income of consumers of inferior good Y decreases;

Question 2: Explain and illustrate using a diagram why a monopolist would never produce in the inelastic range of the demand curve.

In each of the following cases, state whether the monopolist would increase or decrease output:

Marginal revenue exceeds marginal cost at the output produced;

(ii) Marginal cost exceeds marginal revenue at the output produced.