Ch. 4 Learning Curve Micro Economics

Marco owns a shoe store. He recently stocked a style of shoe that he decides to sell for $200 when all other vendors are selling them for $250. Marco is surprised when he quickly sells his entire stock of the shoe. What situation has Marco created?

a shortage

Dr. Larson is a professor at a state university. He is known for being tough but fair in his grading, and rarely gives out A's on his assignments. Considering that Dr. Larson is on the supply side and his students are on the demand side, why is it so difficult to attain an A?

Demand is high, so price is high.

What is the main difference between market and planned economies?

In market economies, individuals make their own production decisions, and in planned economies, these decisions are made by a central power.

Suppose you are a manager at a local coffee shop. You notice that every day by 8 A.M. you are entirely sold out of bagels, but have at least 20 people ask for bagels later in the day. Which of these decisions would result in the BEST outcome for your shop?

Raise the price of bagels.

If prices are rising, what can be stated about the observed market?

The quantity demanded exceeds the quantity supplied.

Malik is a local politician running for governor in his state. What role does Malik play in the market for votes?

demander

A wildly popular but aging rock band announces that their upcoming tour will be the last one before they retire. What effect will this likely have in the market for this band's concert tickets?

increase in demand

When there is a surplus in the market, stores will _____ the good until it reaches the equilibrium price.

lower the price of

There is a decrease in demand. This means the new equilibrium price will be _____ and quantity will be _____.

lower; lower

An increase in supply will cause equilibrium price to _____ and equilibrium quantity to _____.

lower; rise

Jose works at a cellular service provider. He often offers people discounts if they also agree to buy a case and an extra charger from him. Given that Jose had to do this to sell phones, what can be said about the market?

there is a surplus

A guitar manufacturer finds a cheaper source for wood in the production of their electric guitars. During this time, a sharp decrease occurs in the popularity of rock music in favor of electronic dance music created using computers. What effect will this have on price and quantity?

price falls; change in quantity is unknown

Jamal is an engineer working at a large lithium-ion battery production facility. He recently made a breakthrough causing the production cost of lithium-ion batteries used in smartphones to go down. In the market for smartphones, this innovation will cause the equilibrium quantity to _____ and the equilibrium price to _____.

rise;fall

Stella owns a gas station that Ezekiel frequents. In terms of the market for gasoline, Stella is the _____ and Ezekiel is the _____.

supplier; demander