Supply, Demand and Equilibrium
Suppose the price of chicken rises. Which way do you think the beef demand curve will shift?
Outward and rightward
Suppose a drought in Brazil significantly reduces the coffee crop in Brazil? What is likely to happen to the price of coffee at Starbucks and what is likely to happen to the profits for the Starbucks company?
Prices rise because of an increase in costs and profits fall because of a decrease in the quantity demanded.
A set of regulations imposed upon a manufacturer to clean up air and water pollution is likely to:
Shift the supply curve inward and leftward and increase prices
The Law of Supply implies that the supply curve:
Slopes upward
In the 1930s, United States President Franklin Delano Roosevelt's New Deal began a program of price supports for many of America's agricultural products. This program led to:
Surpluses
Which of these is NOT an important shift factor for the supply curve:
Tastes
When the price of chicken rises, people will tend to eat more beef. This is an example of:
The Substitution Effect
During the Arab Oil Embargo of 1974, the OPEC cartel put an embargo on oil sales to the United States. The U.S. government responded with a price ceiling. This led to:
1. Gas lines as a form of rationing
The Law Of Supply states that:
1. The lower the price, ceteris paribus, the less units firms will produce.
Which statement is true?
Both 1 and 2 (1. A shift in the demand curve represents a change in demand, 2. A movement along the demand curve represents a change in the quantity demanded)
Common shift factors used in the analysis of demand include:
Both 1 and 2 (1. Income and tastes, 2. The prices of other products)
Suppose, you believe that the coming winter is going to be unusually warm and rainy because of an El Nino condition and you are a stock market investor. What actions might you take?
Both 1 and 2 (1. Sell your heating oil stocks, 2. Buy companies that provide things like pest control and allergy medicines.)
To say something is in equilibrium in economics is to say that:
Both 1 and 2 (1. The dynamic forces pushing on it cancel each other out., 2. The upward pressure on price is exactly offset by the downward pressure on price.)
The Law Of Demand states that:
Both 1 and 2 (1. The lower the price, ceteris paribus, the more units a consumer will demand., 2. The higher the price, ceteris paribus, the less the consumer will demand.)
Why does quantity demanded tend to fall as price rises?
Both 1 and 2 (The Substitution Effect, The Income Effect)
Ceteris Paribus is a Latin phrase meaning:
Holding other things constant
Suppose you go to the store and see that the price of bread has doubled. Has the demand for bread risen or has bread become more expensive to produce?
Need more information to determine why the price doubled
The assumption of ceteris paribus is useful because it allows economists to draw their graphs in:
Two dimensions
