Chapter 3 Microeconomics

When economists study the behavior of buyers, they are studying:

demand.

The demand curve for videos has shifted to the right. What could have caused it?

An increase in the income of buyers.

consumer incomes decrease

Demand increases, Shifts to the right

List and explain the demand shifters.

Demand shifter is a variable that can change the quantity of a good or service demanded at each price. EX: Preferences, Demographic charateristics, Buyer expectations Prices of related goods and services, Income,

An increase in income will lead to an increase in demand for inferior goods.

False

new machine is developed that allows restaurants and fast-food outlets to produce French fries at a lower cost.

Supply shifts to the right by decreasing, and lowers cost

There is an increase in incomes. What happens in the market for steak?

The equilibrium price and quantity rise.

Given that milk and cookies are complements, suppose the price of flour (an ingredient in cookies) rises. What happens in the market for cookies?

The equilibrium price rises, and the equilibrium quantity falls.

A shortage results from a current price being below the equilibrium price.

True

If two goods are complements, a fall in the price of one will lead to an increase in demand for the other.

True

Describe what would happen in a market if the current price were above the equilibrium price (assume no government interference). Using the same assumptions, describe what would happen if the current price were below the equilibrium price. Use a graph to explain your answer

You will double your price per pound.

Demand and supply curves are drawn assuming ceteris paribus. This means that:

all other things besides price and quantity are assumed unchanged.

For most consumers, videocassette recorders and videocassettes are likely to be:

complementary goods.

Demand

costumers, needs of the people

A market shortage occurs if the:

equilibrium price is above the market price.

A decrease in the price of eggs, all other things unchanged, will result in a(n):

greater quantity of eggs demanded.

A shift of a demand curve to the right, all other things unchanged, will:

increase equilibrium price and quantity.

Economists know that a particular good can be classified as an inferior good if a(n) ________ in buyers' income causes a(n) ________ .

increase; decrease in demand

All other things unchanged, a tax on a product that leads to an increase in the cost of production would:

lead to a decrease in supply.

If the price of a commodity increases, all of the things unchanged, you would expect the:

quantity demanded to decrease.

supply

restaurants, fast foods outlets, nations sweet pea crops

If steak and potatoes are complements, when the price of steak goes up, the demand curve for potatoes

shifts to the left.

The relationship between the quantity of a good or service sellers are willing and able to offer for sale and the independent variables that determine quantity is:

supply.

In the Case in Point on campus parking, the implication was that existing prices for parking spaces and university campuses are generally:

too low.