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Exam 3: Where Prices Come From: the Interaction of Demand and Supply

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Question 91

True/False

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In response to a surplus, the market price of a good will fall; as the price falls, the quantity demanded will increase and quantity supplied will decrease until equilibrium is reached.

A) True
B) False

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Question 92

Multiple Choice

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Which of the following would shift the supply curve for digital cameras to the left?

A) An increase in the price of mobile phones (a substitute in production) .
B) An increase in consumer income (assuming that all digital cameras are normal goods) .
C) A decrease in the price of an input used to produce digital cameras.
D) A decrease in the number of firms that produce digital cameras.

E) C) and D)
F) B) and D)

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Question 93

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Draw a supply and demand graph showing an equilibrium price of $50 and an equilibrium quantity of 200 units. Explain what would happen if the selling price was $75, and illustrate this on the graph. Explain what would happen if the selling price was $25, and illustrate this on the graph. Be sure to label each axis and curve on the graph. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Which of the following would cause an increase in the equilibrium price and an increase in the equilibrium quantity of watermelons?

A change in which of the following variables will change the quantity demanded for a product:

Suppose that when the price of raspberries increases, Lonnie increases his purchases of papayas. To Lonnie raspberries and papayas are:

What are the five variables that will shift the demand curve? _____________________________________________________________________________________________ _____________________________________________________________________________________________

Explain how it would be possible for the equilibrium price and equilibrium quantity to both increase in the market for motorcycles if consumer preference for motorcycles increases and the number of motorcycle manufacturers decreases. _____________________________________________________________________________________________ _____________________________________________________________________________________________

The demand by all the consumers of a given good or service is the ________ for the good or service.

All else equal, as the price of a product falls, the quantity supplied increases.

Which of the following would cause a decrease in the supply of milk?

If the price of orchids falls, the substitution effect due to the price change will cause an increase in the:

A normal good is a good for which the demand increases as income decreases, holding everything else constant.

Suppose that when the price of hamburgers decreases, the Landry family decreases their purchases of chicken nuggets. To the Landry family:

Figure 3.3 -Refer to Figure 3.3. The figure above shows the supply and demand curves for two markets: the market for original Picasso paintings and the market for designer jeans. Which graph most likely represents which market?

A shortage occurs when the market price is lower than the equilibrium price.

Technological advances have resulted in lower prices for high quality mobile phone cameras. What is the impact of this on the market for digital cameras?

Explain the difference between a 'normal good' and an 'inferior good'. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Figure 3.1 -Refer to Figure 3.1. A decrease in the price of the product would be represented by a movement from:

If a decrease in income leads to in a decrease in the demand for baked beans, then baked beans is: