Macroeconomics Chapter 3

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A change in demand comes about only because of a change in the ________________ conditions of demand. This change in demand is a shift in the demand curve to the left or to the right.

ceteris paribus

c. If the price of coffee​ rises, and as a result the demand for sugar​ falls, this implies that these two goods are

complements

An increase in the number of pizza producers or a decrease in the cost of mozzarella cheese used to make pizza will shift the

supply curve for pizza outward.

If the price of flash memory chips used in manufacturing smartphones​ decreases, what will happen in the market for​ smartphones? This would cause smartphone _____________ to _____________, causing the equilibrium price to _____________ and the equilibrium quantity to ___________.

supply; increase; decrease; increase

A decrease in the cost of production.

No

Consumer incomes decrease ​(DVDs are a normal good​).

No

The number of sellers increases.

No

c. The supply of soft drinks decreases.

T

What if the increase in demand were larger than the increase in​ supply?

The equilibrium price and quantity increase.

Which of the following will cause an outward​ (rightward) shift in​ supply?

A technological improvement.

Suppose that paper is necessary to produce books. If the price of paper rises​, the supply curve of

books shifts to the left

If the number of firms in an industry​ decreases, the supply curve will shift to the right.

False

Assume the cost of aluminum used by​ soft-drink companies increases. Which of the following correctly describes the resulting effects in the market for canned soft​ drinks? I. The demand for soft drinks decreases. II. The quantity of soft drinks demanded decreases. III. The supply of soft drinks decreases. IV. The quantity of soft drinks supplied decreases.

II and III.

d. If the present rental rate of​ one-bedroom apartments is​ $600 per​ month, through what mechanism will the rental rate adjust to the equilibrium rental rate of​ $800?

Since the price is below​ equilibrium, the shortage of apartments will cause the quantity supplied to rise and the quantity demanded to fall.

b. The quantity of soft drinks demanded decreases.

T

An increase in the number of buyers.

Yes

The price of movie downloads rise.

Yes

Which of the following will cause the demand curve to​ shift?

a change in consumer income

There is normally _____________ relationship between price and quantity of a good​ supplied, other things held constant.

a direct

According to the law of​ supply, as the price of the good decreases​, it causes

a movement downward along the supply curve.

The law of supply states that there is ____________ relationship between the price and ______________.

a positive; the quantity supplied

The relative price of any commodity is its price in terms of

another commodity.

c. There is an increase in the number of consumers of portable power banks. Equilibrium quantity would ______________. Equilibrium price would ____________.

increase in demand. increase; increase

b. If the price of tennis racquets​ falls, and as a result the demand for tennis balls ____________​, this implies that these two goods are complements.

increases

According to the law of​ demand, the quantity demanded of any commodity is​ ________ related to its​ price, other things being equal.

inversely

According to the example in the​ book, medical research has shown that grapefruit juice can adversely affect the effectiveness of certain medications. This is likely to affect the demand for grapefruit because

people will buy less grapefruit because their tastes and preferences have changed.

The decrease in the price of tablet devices that are complements to portable power banks causes a ______________ shift in the demand for portable power​ banks, from Upper D 1 to Upper D 2. At the price of​ $4 per portable power​ bank, the quantity of portable power banks demanded ____________.

rightward; rises

For​ substitutes, a change in the price of a product will cause a change in demand in the​ ________ direction for the other good. For​ complements, a change in the price of a product will cause a change in demand in the​ ________ direction for the other good.

same; opposite

Whenever there is a change in a ceteris paribus condition there will be a change in​ ________, which is represented by a​ ________.

supply; shift in the entire supply curve

A demand schedule shows

various quantities of a good or service demanded at various prices.

All of the following pairs of goods are substitutes except

we observe the price of bacon increases and the demand for eggs decreases.

All of the following pairs of goods are complements except

we observe the price of coffee decreases and the demand for tea decreases.

Identify which of the following would generate a decrease in the market demand for​ e-book readers, which are a normal good. I. An increase in the price of downloadable apps utilized to enhance the​ e-book reading​ experience, which are complements. II. An increase in the number of consumers in the market for​ e-book readers. III. A decrease in the price of tablet​ devices, which are substitutes. IV. A reduction in the income of consumers of​ e-book readers.

​I, III and IV.

A demand schedule gives a schedule of​ ________ quantities demanded per time dimension at​ ________.

​alternative; different possible prices

A supply schedule gives a schedule of​ ________ quantities supplied per time dimension at​ ________.

​alternative; different possible prices

d. Publishers expect that the market price of economics textbooks will increase next month. This will cause​ a(n)

decrease in supply.

A rightward shift in the supply curve for a good may be caused by any of the following except

an increase in average consumer income

The law of demand posits ____________ relationship between the quantity demanded of a good and its​ price, other things being equal.

an inverse

Thus, as the price decreases​,

the quantity produced by firms decreases.

What is the relative price of a jar of jelly​?

0.600

Suppose that the price of a jar of peanut butter is ​$5 and the price of a jar of jelly is ​$3. What is the relative price of a jar of peanut butter​?

1.667

At​ equilibrium, there is neither excess quantity supplied nor excess quantity demanded.

True

The price at which quantity demanded equals quantity supplied and at which the demand curve intersects the supply curve is called the market clearing price.

True

If the current price of a good is less than the equilibrium​ price, there will be

a shortage of the good and its price will increase.

Consider the chewing gum market shown in the graph at right. An increase in the supply of chewing gum will​ ________ the equilibrium price and​ _________ the equilibrium quantity.

decrease; increase

The quantity of tickets for a Super Bowl game is fixed at 90​,000. At the price per ticket of​ $1,000, there is excess

demand

If the demand and supply curves increase​ (shift outward) by identical proportions then

equilibrium price stays the same and quantity rises.

Whenever the price is ______________ the equilibrium​ price, there is an excess quantity supplied​ (a surplus).

greater than

A surplus occurs when quantity supplied is​ ________ than quantity demanded at a price​ ________ the market clearing price.

greater; above

The market clearing price occurs at the ________________ of the market demand curve and the market supply curve. It is also called the ______________ ​price, the price from which there is no tendency to change unless there is a change in demand or supply.

intersection; equilibrium

Whenever the price is _______________ the equilibrium​ price, there is an excess quantity demanded​ (a shortage).

less than

A shortage occurs when quantity demanded is​ ________ than quantity supplied at a price​ ________ the market clearing price.

​greater; below

d. The quantity of soft drinks supplied decreases.

F

Which of the following is consistent with the law of​ demand?

A doubling of the price of salt led to a 5 percent drop in the quantity of salt purchased.

Identify which of the following would generate an increase in the market demand for tablet​ devices, which are a normal good. I. A decrease in the incomes of consumers of tablet devices. II. An increase in the price of ultrathin​ computers, which are substitutes. III. An increase in the price of online​ apps, which are complements. IV. An increase in the number of consumers in the market for tablet devices.

Both II and IV.

Which of the following is an implication of the law of​ supply?

Producers will offer more units at a higher price and fewer units at a lower price.

b. If the present rental rate of​ one-bedroom apartments is​ $1,000 per​ month, through what mechanism will the rental rate adjust to the equilibrium rental rate of​ $800?

Since the price is above​ equilibrium, the surplus of apartments will cause the quantity supplied to fall and the quantity demanded to rise.

Suppose that at first the price of a bag of coffee is ​$15 and the price of a box of tea is ​$9. ​Then, the price of a bag of coffee changes to ​$30 and the price of a box of tea changes to ​$21. What has happened the money prices and relative prices of these two​ goods?

The money price of a bag of coffee and a box of tea have risen and the relative price of a bag of coffee has fallen while relative price of a box of tea has risen.

Based on the table​ above, which of the following is​ true?

The money prices of both goods​ increased, the relative price of hospital rooms​ increased, and the relative price of hotel suites decreased.

A rise in the demand for a dashboard global positioning minus system device follows a change in the price of automobiles comma which are complements.

The price of the complement decreased.

A fall in the demand for physical books follows a change in the price of e minus books comma which are substitutes.

The price of the substitute decreased.

When there is an inferior good​, a decrease in consumer income will result in the

demand curve shifting to the right

a. If the price of bacon​ rises, and as a result the demand for sausage​ increases, this implies that these two goods are

substitutes

The ___________ curve normally shows a direct relationship between price and quantity supplied.

supply

Which of the following is consistent with the law of​ supply?

An increase in the market price of MP 3 players causes an increase in the production of MP 3 players.

What if the increase in demand were smaller than the increase in​ supply?

Equilibrium price falls and quantity rises.

A change in which of the following will result in a shift of the supply​ curve?

Cost of inputs used to produce the product, taxes and subsidies and technology and productivity

Assume that the cost of aluminum used by​ soft-drink companies increases. Indicate which of the following statements describing the resulting effects in the market for soft drinks distributed in aluminum cans are true​ (T) or false​ (F). a. The demand for soft drinks decreases.

F

A change in a​ good's own price leads to a change in​ supply, which shifts the supply curve.

False

A rise in demand is represented by a leftward shift in the demand​ curve, and a fall in demand is represented by a rightward shift in the demand curve.

False

Shortages and scarcity are the same thing.

False

We measure the demand schedule in terms of a time dimension and in _____________​-quality units.

constant

A decrease in the number of pizza producers or an increase in the cost of mozzarella cheese used to make pizza will shift the

supply curve for pizza inward.

Consider the market for laptop computers. Click on the graph to the right to determine how the following event will impact this market. Do this by illustrating the event on the graph and then assess its impact on the equilibrium quantity and the market price. Event​: The price of memory chips used in laptop computers declines.

The supply​ increases, causing the equilibrium quantity to rise and the market price to fall.

A change in a​ good's own price leads to a change in quantity demanded for any given demand curve.

True

A market demand curve is derived by summing​ (at each​ price) the individual quantities demanded by all buyers in the market.

True

A market supply curve is derived by summing the individual​ producers' supply curves.

True

Which of the following good is an inferior​ good?

When consumer income​ increases, the demand for eggs decreases.

A leftward shift in the supply curve for a good may be caused by any of the following except

a consumer expectation of an increase in their future income

Consider in the graph to the right the demand curve for bananas. The movement from point A to point B could have been caused by

a decrease in the price of bananas.

All of the following will decrease the supply of airline flights except

a technological change that makes airplanes safer and more​ fuel-efficient.

According to the same example in the​ book, medical research has shown that grapefruit juice can reduce the effectiveness of certain medications.​ However, there is also evidence that grapefruit consumption can lower cholesterol in young people. The net effect on demand from these two findings

cannot be determined because they have opposite effects on demand.

Indicate whether the following events would cause an​ "increase or a decrease in demand LOADING...​" or an​ "increase or a decrease in the quantity demanded​" for​ cable-based Internet access​ service, which is a normal good. a. Firms providing wireless​ (an alternative to​ cable) Internet access services reduce their prices. This will cause​ a(n)

decrease in demand.

c. There is a decrease in the incomes earned by consumers of​ cable-based Internet access services. This will cause​ a(n)

decrease in demand.

In the market for portable power​ banks, indicate whether the following events would cause an​ "increase or a decrease in demand​" or an​ "increase or a decrease in the quantity demanded.​" a. There is an increase in the price of carry cases for portable power banks. Equilibrium quantity would _______________. Equilibrium price would ______________.

decrease in demand. decrease; decrease

e. Consumers of portable power banks anticipate that the price of this good will decline in the future. Equilibrium quantity would ______________. Equilibrium price would ____________.

decrease in demand. decrease; decrease

d. There is a decrease in the market demand for smartphones. This will cause​ a(n) Equilibrium quantity would _____________. Equilibrium price would ____________.

decrease in quantity supplied. decrease; decrease

Consider the market for economics textbooks. Explain whether the following events would cause an increase or a decrease in supply or an increase or a decrease in the quantity supplied. a. The market price of paper increases. This will cause​ a(n)

decrease in supply.

b. The price of machinery used to produce smartphones increases. This will cause​ a(n) Equilibrium quantity would ____________. Equilibrium price would _____________.

decrease in supply. decrease; increase

The law of _____________ applies when other​ things, such as income and the prices of all other goods and​ services, are held constant.

demand

Demand curves are drawn with determinants other than the price of the good held constant. These other​ determinants, called ceteris paribus​ conditions, are​ (1) _______________, ​(2) _______________​, ​(3) _______________​, ​(4) _______________​, and​ (5) ________________. If any one of these determinants​ changes, the demand curve will shift to the right or to the left.

income; tastes and preferences; prices of related goods; expectations about future prices and incomes; the number of potential buyers in the market at any given price

d.​ Consumers' tastes shift away from using wireless Internet access in favor of​ cable-based Internet access services.

increase in demand.

b. There is a decrease in the price of devices used to charge portable power banks. Equilibrium quantity would ______________. Equilibrium price would ____________.

increase in demand. increase; increase

d. A booming economy increases the income of the typical buyer of portable power banks ​(this is a normal good​). Equilibrium quantity would ______________. Equilibrium price would ____________.

increase in demand. increase; increase

b. Firms providing​ cable-based Internet access services reduce their prices. This will cause​ a(n)

increase in quantity demanded.

b. The market price of economics textbooks increases. This will cause​ a(n)

increase in quantity supplied.

c. The number of publishers of economics textbooks increases. This will cause​ a(n)

increase in supply.

Consider the market for smartphones. Explain whether the following events would cause an increase or a decrease in supply or an increase or a decrease in the quantity supplied. a. The price of touch screens used in smartphones declines. This will cause​ a(n) Equilibrium quantity would _____________. Equilibrium price would ___________.

increase in supply. increase; decrease

c. The number of manufacturers of smartphones increases. This will cause​ a(n) Equilibrium quantity would ___________. Equilibrium price would ____________.

increase in supply. increase; decrease

The ________________ curve is derived by summing the quantity demanded by individuals at each price.

market demand

The law of supply states that there is a _____________ relationship between the price and __________________.

price; the quantity supplied

​Thus, as the price​ increases, the

quantity supplied by firms increases.

Other things remaining​ equal, the law of demand says that higher prices will lead to a

smaller quantity demanded and lower prices to a larger quantity demanded.

Whenever there is a change in a ceteris paribus condition there will be a change in​ ________, which is represented by a​ ________.

demand; shift in the entire demand curve

According to the law of​ supply, the quantity supplied of any commodity is​ ________ related to its​ price, other things being equal.

directly

According to the​ text, firms encounter rising costs when they attempt to produce more in the same time period. As a​ consequence, they must be offered a higher price to be willing to incur these higher costs. The resulting relationship between price and quantity supplied is

direct​ (or positive) and is called the law of supply.

d. If the price of automobiles ________​, and as a result the demand for motorbikes​ falls, this implies that these two goods are substitutes.

falls

The supply curve is drawn with other things held constant. If these ceteris paribus conditions of supply​ change, the supply curve will shift. The major ceteris paribus conditions are​ (1) ____________​, ​(2) ______________​, ​(3) _______________​, ​(4) _____________​, and​ (5) _____________.

input prices; technology and productivity; taxes and subsidies; expectations of future relative prices; the number of firms in the industry

The ____________ curve is obtained by horizontally adding individual supply curves in the market.

market supply

If the price​ changes, we _______________a curve - there is a change in quantity demanded or supplied. If some other determinant​ changes, we _____________ a curve - there is a change in demand or supply.

move along; shift

A change in the quantity demanded comes about when there is a change in the price of the good​ (other things held​ constant). Such a change in quantity demanded involves a _____________ a given demand curve.

movement along

The law of supply then implies that a _______________ the supply curve occurs due to a change in market price.

movement along

According to the law of​ supply, as the price of the good​ increases, it causes a

movement upward along the supply curve.


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