HW3: Homework - Ch. 3: Supply and Demand

Suppose the cost of lithium-ion batteries, an input in the production of electric vehicles, has dropped more steeply than expected. The accompanying graph depicts the market for electric vehicles. Demonstrate the effect of a reduction in the price of lithium-ion batteries by adjusting the accompanying diagram The equilibrium price is now $ __________ Thousand The equilibrium quantity is now ______________ Thousand

Move the Supply curve to the right The equilibrium price is now $40 thousand The equilibrium quantity is now 6 thousand

Andrew, a college student, loves drinking coffee late at night to study for exams. Having no income, he is used to buying cheap, bad-tasting coffee, such as Beanlightened, that he needs to grind and brew himself. The coffee tastes putrid but with enough cream and sugar, Andrew is able to tolerate it. Occasionally, he does go out to Starbucks when he has spare money. After graduation, Andrew gets a job working at a database firm as a programmer. His income is now a healthy $75,000 a year, and he decides he has had enough bad-tasting coffee. He ends up buying coffee daily from Starbucks, even though it costs significantly more than Beanlightened. Andrew's demanded for Starbucks coffee changed as a result of a. Change in expectations b. change in the number of consumers c. change in technology d. change in income e. change in related good or service

d. change in income

The figure shows the supply and demand for online music suppose that an economic downturn decreases household wealth and erodes consumer confidence. Move the supply and/or demand curves to reflect the primary effect this would have on the market for online music. You can assume that online music is a normal good. Also, select the end result of the equilibrium price and quantity Equilibrium Price: a. change is ambiguous b. increases c. decreases d. remains constant Equilibrium Quantity: a. change is ambiguous b. increases c. decreases d. remains constant

1. Shift the demand curve to the left to reflect the decrease in demand due to the economic downturn. End result on equilibrium price and quantity: Equilibrium Price: Since demand has decreased, and assuming supply remains constant, the equilibrium price will decrease. Equilibrium Quantity: Since demand has decreased, and assuming supply remains constant, the equilibrium quantity will also decrease. So, the answers are: Equilibrium Price: c. decreases Equilibrium Quantity: c. decreases

Suppose that there has been a sudden influx of refugees in the small town of Dallon, leading to a doubling of the local population. The accompanying graph depicts Dallon's market for food. Adjust the graph to show the immediate impact of this population rise on the food market. Then, determine what happens to equilibrium price and quantity. Equilibrium price: a. may increase or decrease but it is impossible to know for sure b. increases c. decreases d. remains constant Equilibrium quantity: a. may increase or decrease but it is impossible to know for sure b. increases c. decreases d. remains constant

Adjustment on the graph: 1. Shift the demand curve to the right to reflect the increase in demand due to the population rise. 2. This shift in demand will result in a new equilibrium point with a higher equilibrium price and quantity of food. Based on this adjustment: Equilibrium price: b. increases Equilibrium quantity: b. increases

The US Government has subsidized ethanol production since 1978. With the advent of affordable electric cars, policymakers are considering allowing the subsidy to expire. The accompanying graph represents the market for ethanol. Move the supply and/or demand curves to show how reducing the subsidy will affect the ethanol market. Equilibrium price a. may increase or decrease but it is impossible to know for sure b. increases c. decreases d. remains constant Equilibrium Quantity a. may increase or decrease but it is impossible to know for sure b. increases c. decreases d. remains constant

Shift the supply curve to the left to reflect the decrease in supply due to the expiration of the subsidy. End result on equilibrium price and quantity: Equilibrium Price: Since supply has decreased, and assuming demand remains constant, the equilibrium price will increase. Equilibrium Quantity: Since supply has decreased, and assuming demand remains constant, the equilibrium quantity will decrease. So, the answers are: Equilibrium Price: b. increases Equilibrium Quantity: c. decreases

Beanlightened Coffee is for Andrew a(n) a. Inferior Good b. Complement c. Normal Good

a. Inferior Good

After discovering that flash-steaming tuna before using mechanical processes to extract meat removes more tuna flesh, more cans of tuna arrive on the shelves at all major grocers a. shift b. movement

a. Shift

Amplitude decides to join the smartphone market a. Shift b. Movement

a. Shift

College students purchase many more energy drinks during finals week than during the rest of the semester a. Shifts in the demand curve b. Movement along the demand curve

a. Shifts in the demand curve

Students eat out more often as the federal government increases how much grant money it provides students. a. Shifts in the demand curve b. Movement along the demand curve

a. Shifts in the demand curve

Hair stylist Molly loses a few of her clients. Molly cuts back on the number of smoothies she buys during the week. Smoothies are _________ good. a. a normal b. an inferior

a. a normal

During the Obama Administration, the development of low-cost batteries for electric cars received large amounts of federal funding in terms of subsidies. Meanwhile, American households gave a higher priority to minimizing their environmental impact. Consider the market for zero-emissions electric vehicles where there is an upward-sloping supply curve and a downward-sloping demand curve. Which direction will the demand and supply shift? a. Both curves will shift left b. Both curves will shift right c. Demand will shift right, and supply will shift left d. Demand will shift left and supply will shift right

b. Both curves will shift right

A national consumer products company produces less of its premium quality soap as a result of lower soap prices. a. Shift b. Movement

b. Movement

Indicate whether each scenario involves a shift in the supply curve or movement along the supply curve. Americans sell their gold and silver jewelry as a result of rising price: a. Shift b. Movement

b. Movement

Categorize each scenario as describing a movement along a demand curve or a shift of the demand curve. College students reduce how much detergent they use for each load of laundry in response to higher detergent prices. a. Shifts in the demand curve b. Movement along the demand curve

b. Movement along the demand curve

College students rush and buy discount furniture to take advantage of an unexpected price drop. a. Shifts in the demand curve b. Movement along the demand curve

b. Movement along the demand curve

What will happen to the equilibrium quantity? a. The quantity decreases b. The quantity increases c. The change is ambiguous d. The quantity remains constant

b. The quantity increases

The accompanying graph represents the supply of printer ink cartridges. The current price of ink (per cartridge) is $20 and indicated by the point on the supply curve. Suppose the price of cartridge increases to $24. Illustrate on the graph how the market for Ink Cartridges change. The _________ of ink cartridges has _______ by _______ billion

Move upwards along the supply curve from the initial point representing $20 to the new point representing $24. The quantity supplied of ink cartridges has increased by a certain amount, but without specific numerical data provided in the question, The quantity supplied of ink cartridges has increased by 2 billion.

The graph contain individual supply curves for the only two firms in a hypothetical market for stuffed animals. Place the market supply curve at the correct location on the graph. Then, consider what would happen to the market if a third supplier enters the market, holding all else constant. A third firm would mean: a. Market supply decreases b. higher prices of stuffed animals c. market supply increases d. Firm 1 and Firm 2 would lower output to accommodate the new supplier in order to keep market supply constant

To place the market supply curve correctly, we need to sum the quantities supplied by each firm at each price level. Then, we can draw the market supply curve. Regarding the impact of a third supplier entering the market: - With the entry of a third supplier, the market supply will increase because there is now an additional source of supply. - So, the correct answer is: c. market supply increases Firm 1 and Firm 2 would not necessarily lower output to accommodate the new supplier. In fact, they might continue producing at their current levels or even increase production if market demand supports it. Therefore, option d is not the correct interpretation of the situation.

For each example listed, decide if the good is a normal good or an inferior good. Make sure you answer from the perspective of the individual or individuals doing the buying or consuming. Billy's mom increases his weekly allowance by $5. As a result, Billy increases the number of apps he downloads on his smartphone. Smartphone apps are _________ good. a. a normal b. an inferior

a. normal

Mike is an appliance salesman. Refridgerator sales in his store have fallen and so has his commission. Mike decides to switch from name brand cereal to generic cereal. Generic cereal is _______ good a. a normal b. an inferior

b. an inferior

Susan gets a 15 percent performance bonus at work. She can finally stop eating so many frozen pizzas and eat something more tasty. Frozen Pizzas are _______ good a. a normal b. an inferior

b. an inferior

In economic terms, Starbucks is for Andrew a(n) a. Inferior Good b. Complement c. Normal Good

c. Normal Good

The Demand Curve: a. depicts the relationship between production cost and outputs b. determines equilibrium price in a market c. is a graphical representation of the relationship between price and quantity demanded d. is a graphical representation of the relationship between price and quantity supplied

c. is a graphical representation of the relationship between price and quantity demanded

What will happen to the equilibrium price? a. The price decreases b. the price increases c. the change is ambiguous d. The price remains constant

c. the change is ambiguous