Macro - 3.2 Shifts in Demand and Supply for Goods and Services

Jeremy is studying the effects of income on the demand for Greek ceramics. If "ceteris paribus" is used, which factors would be held constant when studying the effects of changes in income? Select all that apply: price of Italian ceramics demand for Greek sculptures income demand for Greek ceramics

price of Italian ceramics demand for Greek sculptures When studying the relationship between demand and an influencing factor, the ceteris paribus assumption holds all other influencing factors constant in order to study the effects of only the factor at hand. In Jeremy's case, the price of Italian ceramics and demand for Greek sculptures, among other things, are held constant in order to better understand the relationship between income and demand for Greek ceramics.

The demand curve for a normal good is ______________. sloped upwards sloped downwards horizontal vertical

sloped downwards The demand curves for both an inferior and normal good are sloped downwards as the slope is determined by the law of demand (which is a negative relationship between price and quantity demanded).

substitute goods

A substitute good is one that can be used in place of another good or service. The substitution of a good has an effect on the demand curve for the original good. When rents increase, individuals turn to home purchases as a substitute. When the price of coal increases, energy producers will turn to less expensive substitutes such as natural gas. For some people tea and coffee are substitutes and so are tablets and laptop computers.

For generations, the Irish were among the poorest in the British Isles and relied almost exclusively on simple potatoes, which were inexpensive but not particularly tasty, for sustenance. Potatoes were an inferior food product favored by the poorer sections of the population. All else being equal, how would you expect the demand for potatoes per person to change after several decades of significant economic development? The demand for potatoes is likely to expand. The demand for potatoes is likely to decline. The demand for potatoes is likely to remain unaffected. The demand for potatoes is likely to fall to zero.

The demand for potatoes is likely to decline. Potatoes were an inferior food product favored by the poorer sections of the population. As demand for calories cannot increase ad infinitum, consumers are likely to start substituting potatoes for better quality foods as economic development increases. This is what in fact actually occurred in Ireland by the mid-20th century.

Which of these scenarios is true for a normal good? When a person's income falls, he/she will buy more of the good. When a person's income rises, he/she will buy more of the good. A person buys more of the good when its price is higher. When other similar products are available, a person buys less of the good.

When a person's income rises, he/she will buy more of the good. A product whose demand rises when income rises, and vice versa, is called a normal good. For example, an increase in income makes us buy nicer clothes, restaurant meals, vacations, etc. These are normal goods.

Which of the following will impact the supply of a good? an increase in the price of a similar good a government subsidy to the producers of the good the good becoming less popular an increase in income for consumers of the good

a government subsidy to the producers of the good Price of related goods, consumer taste. and consumer income all impact demand, not supply. When the government subsidizes the production of a good, supply of that good will increase because the subsidy lowers production costs.

Which of the following cannot be an example of a pair of substitute goods? tea and coffee tablets and laptop computers computers and computer mouses coal and natural gas

computers and computer mouses Computers and computer mouses are complementary goods - they are purchased together.

True or false? A rise in the price of DVD players will increase the demand for DVDs.

False DVD players and DVDs are clearly complementary goods. Thus, an increase in the price of one will decrease the demand for the other.

True or false? In general, improvements in technology used in production will result in an increase in supply.

True When a firm discovers a new technology that allows the firm to produce at a lower cost, the supply curve will shift to the right, increasing quantity produced at any given price.

Suppose that while in college, you saved money by eating generic fruits and vegetables from the grocery store. Now, suppose that after you graduated from college you got your first paying job and your income increased. As a result, you started buying higher priced organic fresh fruits and vegetables from specialty stores.This scenario would indicate that the organic fresh fruits and vegetables are a(n) _______ good for you. normal inferior below average less desirable

normal If an increase in income leads to an increase in demand, the good is a normal good. Thus, in this case, as your income increased, you purchased more fruits and vegetables. This makes fresh fruits and vegetables a normal good for you.

Tea and coffee both contain caffeine and are often consumed in place of one another. You are the director of a large coffee plantation. In recent years, poor tea harvests have devastated tea production and significantly increased prices. How would you expect the demand for coffee to change, and why? The demand for coffee should increase because the two goods are complements. The demand for coffee should increase because the two goods are substitutes. The demand for coffee should decrease because the two goods are complements. This is highly unlikely to have any effect on the demand for coffee.

The demand for coffee should increase because the two goods are substitutes. Tea and coffee, which both contain caffeine, are often considered substitutes. If they are substitutes, then we would expect some tea drinkers to respond to the price rise by entering the coffee market and shifting demand to the right.

If there is a decrease in price for printers, what would we expect to happen to the demand for printer cartridges? There will be a decrease in demand for printer cartridges. There will be an increase in demand for printer cartridges. There will be no change in the demand for printer cartridges. There is not enough information.

There will be an increase in demand for printer cartridges. Printers and printer cartridges are clearly complementary goods, so if the price of one decreases, then the demand for the other will increase.

Taking into account ceteris paribus, which of the following factors of production will not impact the supply of corn? a lack of farmers to plant corn seeds a powerful fertilizer to boost the amount of corn grown a decrease in the supply of tractors available to farmers. a disease killing potato plants

a disease killing potato plants Farmers, fertilizer, and tractors are all factors of production that impact the supply of corn growing. Potato plants are not related to the corn market and the corn supply.

When considering factors that shift demand curves, all of the following will decrease demand except _______________. a drop in the price of substitutes a rise in income (for an inferior good) a rise in income (for a normal good) all of these factors decrease demand

a rise in income (for a normal good) A rise in income (for a normal good) will increase demand because people will have more money to spend. For normal goods, higher income causes greater demand at every price.

Recently, the electronic cigarette industry has come under increased scrutiny from retailers. New legislation has been passed that will significantly lessen supply in the medium term, although it will take some time for the legislation to go into effect. Knowing what you know about factors that affect the demand curve, what would you anticipate the effect of this legislation will be on short-run demand for electronic cigarette products? a significant rightward shift in the short-run demand as consumers stock up in anticipation of a shortage a significant leftward shift in the short-run demand as consumers exit the market little to no change in short-run demand followed by significant increase in demand later these regulations only affect the supply curve, not the demand curve

a significant rightward shift in the short-run demand as consumers stock up in anticipation of a shortage Consumer expectations of future price fluctuations can have an immediate impact on demand. If consumers anticipate a shortage or major price hike, then short-run demand will increase as consumers stock up on the product.

Which of the following factors would shift the demand curve? an expectation of a boom in housing prices a news announcement of new health benefits discovered for a vegetable a rise in income due to a booming economy all of the above

all of the above Changing income, changing tastes or preferences, and expectations about the future price can all affect demand. With regard to expectations, a higher expected future price of houses will reduce current demand for houses as buyers delay home purchases.

Which of the following factors would shift the demand curve? a strong snow storm approaching the city a news announcement that gasoline prices will increase next week a local factory laying off thousands of workers in a small city all of the above

all of the above Income, changing tastes or preferences, and expectations about the future price (or expectations about tastes and preferences, income, and so on) can all affect demand.

Which of the following factors would not result in a change in the supply of automobiles? an increase in the price of gasoline a decrease in the price of steel an increase in the price of glass all of these will result in changes in supply

an increase in the price of gasoline Changes in the price of inputs used to make an automobile (steel, rubber, and glass) would change the supply of automobiles. While gasoline is needed to run an automobile, it is not a factor of production. This would affect the demand for automobiles.

When considering factors that shift demand curves, which of the following will increase demand? a decrease in income (for a normal good) a drop in the population likely to buy the good in question encouraged buying based on future expectations a drop in the price of substitutes

encouraged buying based on future expectations Encouraged buying based on future expectations will increase demand because sales increase with encouraged buying.