Econ - Exam 1

What does it mean if a demand curve slopes upward?

Quantity demanded increases as the price increases.

A supply shift affects sellers in what way?

Raises or lowers the supply at any given price

The recent increase in oil prices may cause:

a reduction in the quantity demanded

The following graph represents the market for yachts.

a) The market equilibrium occurs at a price of P2 b) Suppose there is a sudden increase in the demand for yachts because there are more billionaires in emerging markets. The new equilibrium price will be: P1

Here are some examples of new technologies and the markets they affect. Identify whether each of these is a supply or demand shift, and describe its impact on equilibrium price and quantity. a) A new way to cheaply generate electricity from sunlight. a) Market for electricity. b) A new car engine that gets much better gas mileage. b) Market for gasoline. c) A new additive for milk that improves its taste. c) Market for milk

a) supply a)Equilibrium price falls; Equilibrium quantity rises b) demand b) Equilibrium price falls; Equilibrium quantity falls c) demand c) Equilibrium price rises; Equilibrium quantity rises

A downward-sloping supply curve means that:

as price decreases, quantity supplied increases.

If supply increases, equilibrium price:

falls.

Higher income usually means:

higher demand.

A demand shift to the right generally leads to:

higher prices and higher output.

Sam lives in a small town with only one restaurant. The restaurant, run by an eccentric old gentleman, offers a dinner menu on which every dish is the same price. Each month he posts the price of the meal in the window. The following table lists the number of times Sam goes out to dinner at the restaurant during the month, according to the posted price of the dinner: a) Plot the demand curve for meals. Instruction: Use the plotting tool to plot each point (6 points total) along the curve. b) If the price per meal is $12 Sam will eat at the restaurant 6 times during the month.

$12, 6 a) The demand curve for restaurant meals is a down-sloping diagonal curve between points (2,$18) and (24,$3). b) The demand curve shows the various quantities consumers are willing and able to buy at various prices. When the price is $12 the quantity will be 6 restaurant meals per month.

In a small town there's only one construction company that builds new homes. The following table lists the number of new homes built in a year at different selling prices: Sale Price of a New Home (Dollars) Quantity Supplied (Number of New Homes Built in a Year) $150,000 1 $200,000 5 $250,000 8 $300,000 10 $350,000 13 a) Plot the supply curve for new homes. Instruction: Use the plotting tools to plot each point (5 points total) along the supply curve. b.) If the price of a new homes is $250,000, 8 homes will be built.

8 The supply curve for new homes is a upward-sloping curve between points (1,$150,000) and (13,$350,000). The supply curve shows the various quantities producers are willing and able to supply at various prices. When the price is $250,000 the quantity will be 8 homes.

In 2004, the demand curve for cement moved to the right, with what effect?

At any price, the quantity demanded was higher.

What caused the decline in demand for Red Delicious apples?

Consumers found them to be tasteless

A demand shift changes the amount sellers want to supply at various prices.

False

A normal good is one in which the rate of purchase generally rises sharply as income increases.

False

Technological change is the only reason for globalization.

False

The law of demand says that in most cases, the lower the price, the lower the quantity demanded.

False

With inferior goods, demand will increase with an increase in income.

False

The following table reports the (hypothetical) market supply and demand schedules for the iPod and other portable music players. Price per Player Quantity Demanded Quantity Supplied (dollars) (millions) (millions) $50 7 0 $100 5 1 $150 4 2 $200 3 3 $250 2 4 $300 1 5 a) When the price per music player is $100. b) When the price per music player is $300. c) What is the equilibrium price for the music player market?

What is the quantity demanded? 5 million. What is the quantity supplied? 1 million. Is the market in excess supply, excess demand, or equilibrium? The market is in excess demand. What is the quantity demanded? 1 million What is the quantity supplied? 5 million Is the market in excess supply, excess demand, or equilibrium? The market is in excess supply. What is the equilibrium quantity? 3 million

The Gross Domestic Product is calculated by:

adding all goods and services produced within the nation.

Ceteris paribus, when used by economists, means:

all other things equal.

Besides the Gross Domestic Product, other measures of how well an economy is doing are:

annual household income.

The demand schedule is a description of the behavior of _____ in a market.

buyers

A market supply schedule:

combines the quantity supplied by all businesses in a market.

When a demand schedule shifts to the right:

demand increases, equilibrium price increases, and equilibrium quantity increases.

The demand curve is the graphical counterpart to the:

demand schedule.

A supply schedule illustrates the quantity supplied at:

different selling prices.

The law of demand suggests that most demand curves will be:

downward-sloping.

The demand schedule reports the quantity demanded at:

each price.

Most markets, if left alone, will tend toward:

equilibrium price.

On the basic supply demand graph, where the demand curve and supply curve intersect is known as the:

equilibrium price.

The price at which the quantity supplied equals the quantity demanded is the:

equilibrium price.

The demand for automobiles:

is downward-sloping.

Inferior goods experience _____ demand with increased income.

lower

Economic activity around the world is mainly organized by ___________.

market transactions.

Opportunity cost is defined as the value or benefit of the:

next best alternative.

When you give up the opportunity to do something else, the value to you of that activity is called:

opportunity cost.

In a movement along the demand curve:

the demand schedule stays the same, and the price changes.

A market demand schedule for hamburgers would NOT include:

the labor market.

The gap between quantity supplied and quantity demanded is usually closed over time by:

the market mechanism.

The market price is:

the typical price at which a good or service sells.

Supply curves are generally:

upward-sloping.