Supply and Demand

A monopolistic market has

a. only one seller.

If an increase in the price of blue jeans leads to an increase in the demand for tennis shoes, then blue jeans and tennis shoes are

substitutes

When both the demand and supply curves shift, the curve that shifts by the larger magnitude determines the effect on the undetermined equilibrium.

true

Now show the change in the market for desktop computers that is consistent with the following statement: when a technological advance improves the features of laptop computers, the price of laptop computers rises, and the price of a used desktop computer falls

when a technological advance improves the features of laptop computers, the demand for laptop computers increases, shifting the demand curve to the right. The result is a price in both the equilibrium price and quantity of laptop computers. Because laptop computers and desktop computers are substitutes, the technological advance in laptop computers will decrease the demand for used desktop computers. In addition, some people who already own desktop computers will try to sell them as they become less attractive. Therefore, the demand curve for used desktop computers shifts to the left, while the supply curve will shift to the right. The result is a decline in the equilibrium price of used desktop computers. See sections: shifts in the demand curve; shifts in the supply curve; and three steps to analyzing changes in equilibrium

Demand Schedule

A table showing the relationship between the price of a good and the amount that buyers are willing and able to purchase at various prices

Show the change in the market for orange juice that is consistent with the following statement: "when a cold snap hits florida, the price of orange juice rises in supermarkets throughout the country"

Cold weather damages the orange crop, reducing the supply of oranges and raising the price of oranges. This leads to a decline in the supply of orange juice because oranges are an important input in the production of orange juice, causing the equilibrium price of orange juice to rise.

Supply Schedule

a table showing the relationship between the price of a good and the amount of it that sellers are willing and able to supply at various prices

An increase (rightward shift) in the demand for a good will tend to cause

a. an increase in the equilibrium price and quantity.

Suppose there is an increase in both the supply and demand for personal computers. Furthermore, suppose the supply of personal computers increases more than demand for personal computers. In the market for personal computers, we would expect the

b. equilibrium quantity to rise and the equilibrium price to fall.

Suppose both buyers and sellers of wheat expect the price of wheat to rise in the near future. What would we expect to happen to the equilibrium price and quantity in the market for wheat today?

c. Price will increase; quantity is ambiguous.

Suppose consumer tastes shift toward the consumption of apples. Which of the following statements is an accurate description of the impact of this event on the market for apples?

c. There is an increase in the demand for apples and an increase in the quantity supplied of apples.

Which of the following shifts the demand for watches to the right?

c. a decrease in the price of watch batteries if watch batteries and watches are complements

A decrease (leftward shift) in the supply for a good will tend to cause

c. an increase in the equilibrium price and a decrease in the equilibrium quantity.

Which of the following statements is true about the impact of an increase in the price of lettuce?

d. The equilibrium price and quantity of salad dressing will fall.

If an increase in consumer incomes leads to a decrease in the demand for camping equipment, then camping equipment is

d. an inferior good.

The law of supply states that an increase in the price of a good

d. increases the quantity supplied of that good.

The law of demand states that an increase in the price of a good

decreases the quantity demanded for that good.

If the price of a good is below the equilibrium price,

e. there is a shortage and the price will rise.

Quantity Demanded

the amount of a good that buyers are willing and able to purchase at a given price

Quantity Supplied

the amount of a good that sellers are willing and able to supply at a given price

All of the following shift the supply of watches to the right except

a. an increase in the price of watches.

A perfectly competitive market has

many buyers and sellers.

Suppose a frost destroys much of the Florida orange crop. At the same time, suppose consumer tastes shift toward orange juice. What would we expect to happen to the equilibrium price and quantity in the market for orange juice?

b. Price will increase; quantity is ambiguous.

An inferior good is one for which an increase in income causes a(n)

c. decrease in demand.

Suppose there is an increase in both the supply and demand for personal computers. In the market for personal computers, we would expect the

e. equilibrium quantity to rise and the change in the equilibrium price to be ambiguous.

If the price of a good is equal to the equilibrium price,

e. the quantity demanded is equal to the quantity supplied and the price remains unchanged.

If the price of a good is above the equilibrium price,

e. there is a surplus and the price will fall.

Law of Supply

the claim that, other things equal, the quantity supplied of a good increases when the price of the good rises

Law of Demand

the claim that, with other things being equal, the quantity demanded of a good falls when the price of the good rises

Show the change in the market for healthcare that is consistent with the following statement: "when there is an influx of immigrants, the price of healthcare rises"

When there is an influx of immigrants, the numbers of healthcare buyers increases. This leads to an increase in demand for healthcare, resulting in a rise in both the equilibrium price and equilibrium quantity of healthcare. See sections: Shifts in the demand curve; and three steps to analyzing changes in equilibrium

When both the demand and supply curves shift, you can always determine the effect on price and quantity without knowing the magnitude of the shifts

false

Consider the market for pens. Suppose that the number of students with an allergy to pencil erasers increases, causing more students to switch from pencils to pens. Moreover, the price of ink, an important input in pen production, has increased considerably

the medical concerns regarding allergies to erasers result in a decrease in the demand for pencils and an increase in demand for pens. You can illustrate this in the market for pens by shifting the demand curve to the right. Intuitively, That means that a given quantity, consumers are willing to pay more for pens; alternatively, at a given price, consumers are willing to buy more pens as for supply, the increase in the price of an important production input, such as cost of ink used to make pens, means that it's now more expensive to produce pens. Since an increase in the cost of pen production leads to a decrease in supply, you can illustrate the effect of an increase in the price of ink by shifting the supply curve up and to the left. Intuitively, this means that, at a given quantity, producers are willing to accept a higher price for pens; alternatively, at a given price, producers are willing to produce fewer pens. Therefore, you should have indicated a positive shift in demand and a negative shift in supply for both scenarios

Show the change in the market for electric cars that is consistent with the following statement: "when the price of electric cars is expected to rise in the near future, the present price of electric cars rises"

when buyers expect the price of electric cars to rise in the future, they may want to buy the cars now at lower prices. This leads to an increase in demand for electric cars, causing the equilibrium price to rise. At the same time, when sellers of electric cars expect the price to rise in the future, they would want to lower current supply of cars to save it for later. The decrease in supply will lead to a rise in the equilibrium price. See sections: shifts in the demand curve; shifts in the supply curve; and three steps to analyzing changes in equilibrium

Show the change in the market for Caribbean hotel rooms that is consistent with the following statement: "when the weather turns warm in New England every summer, the price of hotel rooms in Caribbean resorts plummets"

People often travel to the Caribbean from New England to escape cold weather, so the demand for Caribbean hotel rooms is high in the winter. In the summer, fewer people travel to the Caribbean because northern climates are more pleasant, causing demand to decrease. The equilibrium price of Caribbean hotel rooms is thus lower in the summer than in the winter.

Consider the market for pens. Suppose that a new educational study has proven that the practice of writing, erasing, and rewriting improves students' ability to process information, leading parents to steer away from pen use in favor of pencils. Moreover, the price of plastic, an important input in pen production, has dropped considerably

The educational concerns regarding pens result in an increase in the demand for pencils and a decrease in the demand for pens. You can illustrate this in the market for pens by shifting the demand curve to the left. Intuitively, this means that, at a given quantity, consumers are willing to pay less for pens; alternatively, at a given price, consumers are willing to buy fewer pens As for supply, the decrease in the price of an important input, such as the cost of plastic used to make pens, means that it's now cheaper to produce pens. Since a decrease in the cost of pen production leads to an increase in supply, you can illustrate the effect of a decrease in the price of plastic by shifting the supply curve down and to the right. Intuitively, that means that, at a given quantity, producers are willing to accept a lower price for pens; alternatively, at a given price, producers are willing to produce more pens. Therefore, you should have indicated a negative shift in demand and a positive shift in supply for both scenarios

The following graph shows the market for roses in 2007. Between 2007 and 2008, the equilibrium price of roses remained constant, but the equilibrium quantity of roses increased. From this, you can conclude that between 2007 and 2008, the supply of roses increased and the demand for roses increased

To solve this puzzle, start by thinking about the individual effects of shifts in supply and demand on the equilibrium price and quantity of roses. If the demand for roses remains constant, a shift in the supply curve would result in a movement along the demand curve. If the supply of roses remains constant, a shift in the demand curve would result in a movement along the supply curve. Either way, this causes a change in both the equilibrium price and the equilibrium quantity. However, because the price of roses remained constant in this case, both the supply curve and the demand curve must have shifted, and the effects of those shifts on the equilibrium price offset each other. Therefore, the curves shifted in the same direction. Because the quantity of roses increased, the supply of roses increased and the demand for roses increase=

Demand Curve

a graphical object showing the relationship between the price of a good and the amount of the good that buyers are willing and able to purchase at various prices

Supply Curve

a graphical object showing the relationship between the price of a good and the amount that sellers are willing and able to supply at various prices

Show the change in the market for gasoline that is consistent with the following statement: "When a war breaks out in the Middle East, the price of gasoline rises, and the price of a used Cadillac falls". Hint: assume that used Cadillacs are gas guzzlers that are undesirable to own if gasoline becomes more expensive Now show the change in the market for used Cadillacs that is consistent with the following statement: "When a war breaks out in the middle east, the price of gasoline rises, and the price of a used Cadillac falls"

when a war breaks out in the middle east, many markets are affected. Because a large proportion of oil production takes place there, the war disrupts oil supplies, shifting the supply curve for gasoline to the left. The result is a rise in the equilibrium price of gasoline. With a higher price for gasoline, the cost of operating a gas-guzzling automobile such as an older Cadillac will increase. As a result, the demand for used cadillacs will decline, as people in the market for cars will not find older cadillacs as attractive. In addition, some people who already own older cadillacs will try to sell them. Therefore, the demand curve for used cadillacs shifts to the left, while the supply curve shifts to the right. The result is a decline in the equilibrium price of used cadillacs.