Principle of Economics
The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S2 (point B). Which of the following changes would cause the equilibrium to change to point C? Part 2
A positive change in the technology used to produce apples and decrease in the price of oranges, a substitute for apples.
A decrease in the price of the product would be represented by a change from
B to A.
In recent years the cost of producing organic produce in the United States has decreased largely due technological advancement. At the same time, more and more Americans prefer organic produce over conventional produce. Which of the following best explains the effect of these events in the organic produce market? Part 2
Both the supply and demand curves have shifted to the right. As a result, there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.
An increase in the number of firms in the market would be represented by a movement from
S1 to S2.
Holding everything else constant, an increase in the price of MP3 players will result in
a decrease in the quantity of MP3 players demanded.
If the price of cholocate increases, then there will be
a decrease in the quantity of chocolate demanded.
The phrase "demand has decreased" means that
a demand curve has shifted to the left.
If a decrease in income leads to a decrease in the demand for mac and cheese, then mac and cheese is
a normal good.
If an increase in income leads to in an increase in the demand for peanut butter, then peanut butter is
a normal good.
Assume that cotton is a normal good. Which of the following would cause both the equilibrium price and equilibrium quantity of cotton to increase?
an increase in consumer income
An increase in the demand for lobster due to changes in consumer tastes, accompanied by a decrease in the supply of lobster as a result bad weather reducing the number of fishermen trapping lobster, will result in
an increase in the equilibrium price of lobster; the equilibrium quantity may increase or decrease.
If a decrease in income leads to an increase in the demand for sardines, then sardines are
an inferior good.
If an increase in income leads to a decrease in the demand for popcorn, then popcorn is
an inferior good.
Elvira decreased her consumption of bananas when the price of peanut butter increased. For Elvira, peanut butter and bananas are
complements.
If a demand curve shifts to the right, then
demand has increased.
If in the market for peaches the supply curve has shifted to the left,
the supply of peaches has decreased.
If the price is $10,
there would be a shortage of 600 units.
At a price of $20,
there would be a surplus of 8 units.
At a product's equilibrium price
the product's demand curve crosses the product's supply curve.
Refer to Table 3−2. The table above shows the demand schedules for caviar of two individuals (Ari and Sonia) and the rest of the market. At a price of $55, the quantity demanded in the market would be
178 oz.
At a price of $10, how many units will be sold?
200
The table above shows the demand schedules for loose−leaf tea of two individuals (Sunil and Mia) and the rest of the market. At a price of $5, the quantity demanded in the market would be
63 lbs
Which of the following would cause the equilibrium price to decrease and the equilibrium quantity of white bread to increase?
A decrease in the price of flour.
The graph illustrates an initial competitive equilibrium in the market for apples at the intersection of D2 and S2 (point E). Which of the following changes would cause the equilibrium to change to point A?
A decrease in the wages of apple workers and an increase in the price of oranges, a substitute for apples.
In 2004, hurricanes damaged a large portion of Florida's orange crop. As a result of this, many orange growers were not able to supply fruit to the market. After the hurricane, what would we expect to see happen in the market at the pre-hurricane (initial) equilibrium price?
A shortage of oranges.
What do economists mean when they use the Latin expression ceteris paribus?
All else equal.
The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D2 and S1 (point C). Which of the following changes would cause the equilibrium to change to point B?
An increase in the wages of apple workers and an increase in the price of oranges, a substitute for apples.
Which of the following would cause a decrease in the supply of milk?
An increase the price of a product that producers sell instead of milk.
What is the difference between an "increase in demand" and an "increase in quantity demanded"?
An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve.
What is the difference between an 'increase in supply' and an 'increase in quantity supplied'?
An "increase in supply" means the supply curve has shifted to the right while an "increase in quantity supplied" refers to a movement along a given supply curve in response to an increase in price.
Which of the following is the correct way to describe equilibrium in a market?
At equilibrium, quantity demanded equals quantity supplied.
An increase in population would be represented by a change from
D1 to D2.
A decrease in the price of a complementary good would be represented by a change from
D1 to D2.
An increase in the expected future price of the product would be represented by a change from
D1 to D2.
A decrease in taste or preference would be represented by a change from
D2 to D1.
A decrease in the price of a substitute good would be represented by a change from
D2 to D1.
An increase in price of inputs would be represented by a change from
S2 to S1.
An increase in the price of substitutes in production would be represented by a movement from
S2 to S1.
Let D = demand, S = supply, P = equilibrium price, and Q = equilibrium quantity. What happens in the market for electric vehicles if the government offers incentives to manufacturers to produce more electric vehicles?
S increases, D no change, P decreases, Q increases
The graph in this figure illustrates an initial competitive equilibrium in the market for sugar at the intersection of D1 and S1 (point A). If there is an increase in the price of fertilizer used on sugar cane and there is a decrease in tastes for sugar-sweetened soft drinks, how will the equilibrium point change?
The equilibrium point will move from A to E.
The graph illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S1 (point A). If the price of oranges, a substitute for apples, decreases and the wages of apple workers increase, how will the equilibrium point change?
The equilibrium point will move from A to E.
The graph in this figure illustrates an initial competitive equilibrium in the market for sugar at the intersection of D1 and S2 (point B). If there is an decrease in the price of fertilizer used on sugar cane and there is a decrease in tastes for sugar−sweetened soft drinks, how will the equilibrium point change?
The equilibrium point will move from B to C.
Which of the following is evidence of a surplus of bananas?
The price of bananas is lowered in order to increase sales.
Which of the following is evidence of a shortage of walnuts?
The quantity of walnuts demanded is greater than the quantity supplied.
In October 2005, the U.S. Fish and Wildlife Service banned the importation of beluga caviar, the most prized of caviars, from the Caspian Sea. What happened in the market for caviar in the U.S.?
The supply curve shifted to the left.
The graph illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S1 (point A). If there is a shortage of apples how will the equilibrium point change?
There will be no change in the equilibrium point.
A movement along the demand curve for toothpaste would be caused by
a change in the price of toothpaste.
A decrease in the demand for soft drinks due to changes in consumer tastes, accompanied by an increase in the supply of soft drinks as a result of reductions in input prices, will result in
a decrease in the equilibrium price of soft drinks; the equilibrium quantity may increase or decrease.
Which of the following will shift the demand curve for a good?
a decrease in the price of a complementary good
Ranchers can raise either cattle or sheep on their land. Which of the following would cause the supply of sheep to increase?
a decrease in the price of cattle
In a free market such as that depicted to the right, a surplus is eliminated by
a price decrease, decreasing the quantity supplied and increasing the quantity demanded.
If the current market price is $10, the market will achieve equilibrium through
a price increase, increasing the quantity supplied and decreasing the quantity demanded.
A supply schedule
a table that shows the relationship between the price of a product and the quantity supplied
Which of the following would cause an increase in the supply of peanut butter?
an increase in the number of firms that produce peanut butter
Assume that both the demand curve and the supply curve for MP3 players shift to the right but the demand curve shifts more than the supply curve. As a result
both the equilibrium price and quantity of MP3 players will increase.
The table above shows the demand schedules for loose−leaf tee of two individuals (Sunil and Mia) and the rest of the market. If the price of loose−tea raises from $3 to $4 the market quantity demanded would
decrease by 32 pounds.
The table above shows the demand schedules for caviar of two individuals (Ari and Sonia) and the rest of the market. If the price of caviar rises from $65 to $75, the market quantity demanded would
decrease by 36 oz.
A(n) ________ is represented by a leftward shift of the demand curve while a(n) ________ is represented by a movement along a given demand curve.
decrease in demand; increase in quantity demanded
The ________ effect refers to the change in quantity demanded for a good that results from the effect of a change in the good's price on consumer's purchasing power.
income
The table above shows the demand schedules for caviar of two individuals (Ari and Sonia) and the rest of the market. If the price of caviar falls from $45 to $35, the market quantity demanded would
increase by 70 oz.
Studies have shown that drinking one glass of red wine per day may help prevent heart disease. Assume this is true, and favorable weather has increased the grape harvest of California vineyards. In the market for red wine, these two developments would Part 2
increase demand and increase supply, resulting in an increase in the equilibrium quantity and an uncertain effect on the equilibrium price of red wine.
At a price of $5, the quantity sold
is 2 units.
At a price of $10, the quantity sold
is 4 units.
The demand by all the consumers of a given good or service is the ________ for the good or service.
market demand
If a firm has an incentive to increase supply now and decrease supply in the future, the firm expects that the
price of its product will be lower in the future than it is today.
By drawing a demand curve with ________ on the vertical axis and ________ on the horizontal axis, economists assume that the most important determinant of the demand for a good is the ________ of the good.
price; quantity; price
If, for a product, the quantity supplied exceeds the quantity demanded, the market price will fall until
quantity demanded equals quantity supplied. The market price will then equal the equilibrium price
Tomas increased his consumption of potato chips when the price of pistachios increased. For Tomas, potato chips and pistachios are
substitutes.
If the price of automobiles were to increase, then
the demand for gasoline would decrease.
Assume that both the demand curve and the supply curve for MP3 players shift to the right but the supply curve shifts more than the demand curve. As a result
the equilibrium price of MP3 players will decrease; the equilibrium quantity will increase.
Assume that the demand curve for MP3 players shifts to the right and the supply curve for MP3 players shift to the left, but the supply curve shifts less than the demand curve. As a result
the equilibrium price of MP3 players will increase; the equilibrium quantity will decrease.
Assume that the demand curve for MP3 players shifts to the right and the supply curve for MP3 players shift to the left, but the supply curve shifts more than the demand curve. As a result
the equilibrium price of MP3 players will increase; the equilibrium quantity will decrease.
The income effect of a price change refers to the impact of a change in
the price of a good on a consumer's purchasing power.
One would speak of a change in the quantity of a good supplied, rather than a change in supply, if
the price of the good changes.
A change in all of the following variables will change the market demand for a product except
the price of the product.
The law of demand implies, holding everything else constant, that as the price of bagels increases,
the quantity of bagels demanded will decrease.
A decrease in the equilibrium quantity for a product will result
when there is a decrease in supply and a decrease in demand for the product.
An increase in the equilibrium price for a product will result
when there is a decrease in supply and an increase in demand for the product.
The law of demand implies, holding everything else constant, that as the price of gelato
decreases, the quantity of gelato demanded will increase.
When the price of a normal good falls, consumers buy a larger quantity because of the ________ effect and the ________ effect.
substitution; income
