2.1 - 2.7 Q&A

Which one of the following would NOT occur if the market price was above the market equilibrium.

Consumers would bid up the price

Which of the following will cause the demand for kerosene heater to increase?

A decrease in the price of kerosene (complement)

Suppose the demand curve is given by D_Q = 200 - 2P +4I D_S = 3P-50 A) If I = 25, find the market clearing price and quantity B) If I = 50, find the market clearing price and quantity C) Draw a graph to illustrate your answers I) Use the line drawing tool , accurately grapy the new demand curve using the demand equation (from B) II) Use the point drawing tool, indicate the new equilibrium

A) Can be read from the diagram Q_D = 200 - 2P +(4*25) Q_D = 300-2P 300-2P = 3P-50 |-300 - 3P -5P = -350 | Div -5 E_P = 70 E_Q = 3*70 -50=160 B) Q_D = 200 - 2P +(4*50) Q_D = 400 -2P 400 -2P = 3P-50 | - 400 -3P -5P = -450 | Div -5 E_P = 90 E_Q = 3*90-50=220 C) Draw the equilibrium for P = 90 and Q = 220 And then, just draw a matching Demand line

Even though the annual consumption of copper is now about 100 times greater than it was in 1880, the real price of copper has remained relatively unchanged. Which of the following help account for this pattern?

All of the aboce

Which of the following will cause the demand for kerosene heater to decrease?

An increase in the price of kerosene (complement)

A product's price and the quantity consumed both decreased from one year to the next. Which of the following could have happened?

Demand decreased and supply remained constant

Use the supply and demand curve to illustrate how the following event would affect the price of butter the quantity of butter bought and sold. 1) Using the line drawing tool, show the effect of a *DECREASE* in the price of *margarine* in the market for butter illustrated in the figure to the right by drawing either a new supply or demand curve and label the new curve accordingly 2) Use the point drawing tool, identify the new equilibrium price and quantity. Label this point accordingly

Demand goes down, thus demand Curve shifts inwards (to the left) along the supply curve, thus reducing price. Supply reduced its quantity supplied, thus a shift along the supply curve happens. Therefore, Demand D' is below D.

Use the supply and demand curve to illustrate how the following event would affect the price of butter the quantity of butter bought and sold. 1) Using the line drawing tool, show the effect of a *DECREASE* of the *average income* in the market for butter illustrated in the figure to the right by drawing either a new supply or demand curve and label the new curve accordingly 2) Use the point drawing tool, identify the new equilibrium price and quantity. Label this point "new equilibrium "

Demand goes down, thus demand Curve shifts inwards (to the left) along the supply curve, thus reducing price. Supply reduced its quantity supplied, thus a shift along the supply curve happens. Therefore, Demand D' is below D.

Use the supply and demand curve to illustrate how the following event would affect the price of butter the quantity of butter bought and sold. 1) Using the line drawing tool, show the effect of an *INCREASE* in the price of *margarine* in the market for butter illustrated in the figure to the right by drawing either a new supply or demand curve and label the new curve accordingly 2) Use the point drawing tool, identify the new equilibrium price and quantity. Label this point

Demand goes up, thus demand Curve shifts outwards (to the right) along the supply curve, thus increasing price.

Use the supply and demand curve to illustrate how the following event would affect the price of butter the quantity of butter bought and sold. 1) Using the line drawing tool, show the effect of an INCREASE of the average income in the market for butter illustrated in the figure to the right by drawing either a new supply or demand curve and label the new curve accordingly Use the point drawing tool, identify the new equilibrium price and quantity. Label this point accordingly.

Demand goes up, thus demand Curve shifts outwards (to the right) along the supply curve, thus increasing price. Supply increases, thus a shift up along the supply curve happens. Therefore, Demand D' is above D.

A product's price and the quantity consumed both increased from one year to the next. Which of the following could have happened?

Demand increased and supply remained constant

Use the supply and demand curve to illustrate how the following event would affect the price of butter the quantity of butter bought and sold. 1) Using the line drawing tool, show the effect of an *DECREASE* in the price of milk on the market for butter illustrated in the figure to the right by drawing either a new supply or demand curve and label the new curve accordingly 2) Use the point drawing tool, identify the new equilibrium price and quantity. Label this poi

Milk = Raw material required for production. Price falls due to lower production cost. The falling price is a down shift of the supply curve along the demand curve. Thus, the new equilibrium is the intersection of the new supply curve S' and the demand curve D just below the old equilibrium.

Use the supply and demand curve to illustrate how the following event would affect the price of butter the quantity of butter bought and sold. 1) Using the line drawing tool, show the effect of an *INCREASE* in the price of *milk* on the market for butter illustrated in the figure to the right by drawing either a new supply or demand curve and label the new curve accordingly 2) Use the point drawing tool, identify the new equilibrium price and quantity. Label this point "new equilibrium "

Milk = Raw material required for production. Price rises due to higher production cost. The rising price is a up shift of the supply curve along the demand curve. The new equilibrium is the intersection of the new supply curve S' and the demand curve D.

Suppose that unusually hot weather causes the demand curve for ice cream to shift to the right, Why will the price of ice cream rise to a new market clearing level?

Shift the DEMAND curve to the right, initially creating a shortage until the price RISES to where quantity supplied again equals quantity demanded.

When supply decreases, the supply curve..?

Shifts to the left

When supply increases, the supply curve..?

Shifts to the right

Which of the following would NOT cause the demand for Coca Cola to shift?

The cost of producing Coca cola increases (Movement along the curve)

Steel and aluminum are substitutes. If the price of steel increases, other thins remaining the same, we would expect the price of aluminum to....[x] and the equilibrium quantity of aluminum to... [y]

[x] = increase | because of higher demand... [y] = increase | because of higher demand caused by the higher steel price

A market is in equilibrium when

the price is such that the amount consumers want to buy equals the amount producers want to sell.