econ 203 CH 3

What effect will each of the following have on the supply of auto tires?

a. A technological advance in the methods of producing tires: Supply increases. b. A decline in the number of firms in the tire industry: Supply decreases. c. An increase in the price of rubber used in the production of tires: Supply does not change Supply increases Supply decreases . d. The expectation that the equilibrium price of auto tires will be lower in the future than it is now: Supply increases . e. A decline in the price of large tires used for semi trucks and earth-hauling rigs (with no change in the price of auto tires): Supply increases. f. The levying of a per-unit tax on each auto tire sold: Supply decreases . g. The granting of a 50-cent-per-unit subsidy for each auto tire produced: Supply increases.

Label each of the following scenarios with the correct combination of price change and quantity change. In some scenarios, it may not be possible from the information given to determine the direction of a particular price change or a particular quantity change. We will symbolize those cases as, respectively, "P?" and "Q?".

a. On a hot day, both the demand for lemonade and the supply of lemonade increase. Price:P? Quantity: Increases b. On a cold day, both the demand for ice cream and the supply of ice cream decrease. Price: P? Quantity: Decreases c. When Hawaii's Mt. Kilauea erupts violently, tourists' demand for sightseeing flights increases but the supply of pilots willing to provide these dangerous flights decreases. Price: Increases Quantity: Q? d. In a hot area of Arizona where a lot of electricity is generated with wind turbines, the demand for electricity falls on windy days as people switch off their air conditioners and enjoy the breeze. But at the same time, the amount of electricity supplied increases as the wind turbines spin faster. Price: Decreases Quantity: Q?

Suppose there are three buyers of candy in a market: Tex, Dex, and Rex. The market demand and the individual demands of Tex, Dex, and Rex are shown in the following table.

b. Which buyer demands the least at a price of $5? Dex. The most at a price of $7? Rex c. Which buyer's quantity demanded increases the most when the price decreases from $7 to $6? Rex d. Which direction would the market demand curve shift if Tex withdrew from the market? to the left What if Dex doubled his purchases at each possible price? to the right e. Suppose that at a price of $6, the total quantity demanded increases from 22 to 32. Is this a "change in the quantity demanded" or a "change in demand"? change in demand

A price ceiling will result in a shortage only if the ceiling price is_____ the equilibrium price.

less than

Suppose that in the market for computer memory chips, the equilibrium price is $50 per chip. If the current price is $55 per chip, then there will be a ________ of memory chips.

surplus