Module 5

Suppose the number of bookstores selling textbooks in a university town increases. What will happen in the market for textbooks?

The correct answer is If the number of producers increases, the supply increases.

If two products are substitutes in production, an increase in the price of one of the products will result in a(n) _____ in supply of the other product.

decrease

If the price is below the equilibrium price:

there will be excess demand. At prices below the equilibrium price, quantity demanded is greater than quantity supplied—excess demand.

An oil refiner can produce either gasoline or heating oil. To the refiner, gasoline and heating oil are:

substitutes in production.

Suppose you hear a news story reporting that the price of skydiving lessons has gone up. According to the law of supply, what would you expect as a result?

The quantity of skydiving lessons supplied will increase. The positive slope of supply indicates how price and quantity supplied relate to one another.

If beef and leather are complements in production, when the price of beef increases, what happens in the market for leather?

The supply of leather increases. When the price of a complement in production increases, the supply of the other product increases.

The supply curve for pencils:

has a positive slope. The supply curve has a positive slope because at higher prices producers are willing to sell more pencils.

If there is a shortage in a competitive market, the price will _____

increase

the number of producers increases, market supply will _____

increase

The supply curve for lemonade has a positive slope because as the price increases, the quantity supplied of lemonade will _____.

increase According to the law of supply, as price increases, the quantity supplied increases. This is reflected in the positive slope of the supply curve.

If two products are complements in production, an increase in the price of one of the products will result in a(n) _____ in supply of the other product.

increase If two products are complements in production, they are produced together. If the price of one of the products increases, more of that product is produced. Since complements are produced together, more of the other product is produced as well.

A shift in the supply curve represents a change in _____.

supply A movement along a stationary supply curve represents a change in quantity supplied, while a shift in the curve represents a change in supply.

If the price of an input increases:

supply decreases and the supply curve shifts to the left. An increase in the price of an input decreases supply, and the supply curve shifts to the left.