Macroeconomics ch 3-4

When a consumer's income level is low, it is MORE likely the consumer will purchase ______ goods.

inferior

(Figure: Interpreting a Market Graph) The graph represents:

the law of supply

(Figure: Market for Shoes) If the price of shoes is $40 per pair, the quantity demanded will be _____ pairs of shoes.

15

(Figure: Determining Surplus 6) We can calculate the total surplus as:

$40,000 (consumer surplus + producer surplus, 1/2b*h)

If bagels and doughnuts are substitute goods, then which of the following is likely to occur if the price of bagels is reduced?

The demand curve for doughnuts will shift to the left

Using the data for the market for lattes in the table, at a price of $6:

The price of lattes will stay the same.

Which of the following will NOT cause the supply curve for kayaks to shift to the left?

a decrease in the price of a kayak

Which of the following would cause a decrease in the demand for coffee?

a decrease in the price of tea (a substitute for coffee)

(Figure: Determining Total Surplus) In this graph, total surplus is shown by area:

ace

The government often strictly regulates noise and chemical pollution by industry to overcome which market failure?

negative externality (external costs)

The government often provides funding for the arts when markets do not do so sufficiently. This funding is to overcome which market failure?

positive externality (external benefits)

The government's capping the price of gasoline at $2 a gallon is an example of a:

price ceiling

When quantity demanded exceeds quantity supplied, a

shortage occurs and prices are bid up toward equilibrium.

Consumer surplus is shown graphically as the area:

under the demand curve and above the market price