ECON 2302 - CH 4 Questions
Assume that the price in a market is currently below the equilibrium price. Explain exactly why that situation will change by putting the steps in the correct order.
*There is a shortage since quantity demanded is greater than quantity supplied *Some buyers are willing to pay more for a good and sellers can raise prices while still selling all of their supply *Prices begin to rise *Quantity demanded begins to decrease and quantity supplied increases *The shortage becomes smaller *The steps repeat until there is a new equilibrium *A new equilibrium is reached with a larger quantity exchanged and a higher price
Indicate which of the following will cause a movement along a demand curve. Which will shift the demand curve to the left? Which will shift the demand curve to the right? Will demand increase or decrease?
+An increase in the price of the good- A movement along a demand curve¸ no change in demand +An increase in income for a normal good -Shift the demand curve to the right and an increase in demand +A decrease in the price of a substitute good -Shift the demand curve to the left and a decrease in demand. +Expectations of falling income in the near future -Shift the demand curve to the left and a decrease in demand. (If the good is normal.) +Expectations of rising prices in the near future -Shift the demand curve to the right and an increase in demand now.
"Many Coca-Cola bottlers increased the price of Coke because the price of corn syrup (an important ingredient in Coke production) has increased." Other things constant, this most recent change in the market for Coca-Cola can best be explained as which of the following?
A decrease in supply with demand relatively unchanged
Since 1950, the labor force participation rate of women with young children has increased dramatically. In accordance with this trend, one would predict that there has been _______________.
An increase in the demand for child care services
If income decreases and, at the same time, a new technology is discovered that lowers the cost of producing the good, which of the following will happen?
Cannot tell the change in equilibrium quantity. The equilibrium price will decrease.
New technology lowering the costs of production will cause the equilibrium price to ______________ and the equilibrium quantity to ______________.
Decrease; increase
Assume that tastes change so that tennis is no longer as desirable to play as it is now. What would happen to the market for tennis balls?
Demand decreases, the equilibrium quantity is smaller, and the price is lower.
Christmas card sales increase during the last three months of the year, and the sale of fresh strawberries in the North increase during the early summer months. However, the equilibrium price movement of these two commodities is quite different during their peak sales seasons. Christmas cards increase in price when the equilibrium quantity increases, whereas strawberries decrease in price when the equilibrium quantity increases. Why does this difference occur?
Demand for Christmas cards increases; supply of strawberries increases
A new research study shows that ice cream lowers the risk of cancer. What happens to demand?
Demand increases, tastes and preferences increases
If (1) the cost of manufacturing computers decreases and (2) at the same time the quality improves, making computers more useful for households, which of the following is most likely to happen?
Equilibrium price may increase or decrease; equilibrium quantity will increase
Oil-based products are a significant part of the materials used to build sailboats. What is likely to happen in the market for new sailboats and in the market for sails, if the price of oil begins to rise?
Equilibrium quantity will be lower for sailboats and sails; Equilibrium price will be higher for sailboats and the change in equilibrium price for sails is ambiguous.
"Falling oil prices have caused a sharp decrease in the supply of oil." Speaking precisely, this quotation is _______.
Incorrect; a decrease in price causes a decrease in the quantity supplied, not a decrease in supply.
An increase in the prices of inputs will cause the equilibrium price to ______________ and the equilibrium quantity to ______________.
Increase; decrease
A decrease in the price of a complementary good will cause its complement's equilibrium price to ______________ and the equilibrium quantity to ______________.
Increase; increase
An increase in the price of a substitute good will cause the equilibrium price of its substitute to ______________ and the equilibrium quantity to ______________.
Increase; increase
What happens to equilibrium price and quantity if the number of consumers increases?
Price increases, quantity increases
The price of coffee decreases. What happens to demand?
Quantity demanded increases, price decreased
A new factory can create 4 times the number of batteries per year for electric cars. What will happen to supply?
Supply will increase, technology has imporved
"The winds of the recent hurricanes in Florida are bringing significant financial gain to California orange growers. Due to the extensive damage to the Florida orange crop, many oranges were destroyed. The ones remaining were just as good as the previous oranges. California oranges are commanding their highest prices ever." If Florida and California oranges are substitute goods, which of the following statements best explains the economics of the quotation?
The supply of Florida oranges has decreased, causing their price to increase and the demand for the California oranges to increase also.
If the price of trucks increase
The supply of cars will increase and the demand for cars will increase
