Chapter 3 & 4

What is consistent with the law of demand?

A doubling of the price of salt led to a 5 percent drop in the quantity of salt purchased.

What is the economic effect of a ceiling?

An effective price ceiling will lead to a shortage.

If a pharmaceutical company has an increase in a demand for medicine with an aging senior populations, what happens to demand?

Demand will increase and the price will rise.

According to the law of supply, price and quantity are ______ related?

Directly

If the price of flash memory chips in smartphones decreases, what happens to the supply, equilibrium price and equilibrium quantity?

If the price decreases, the supply of smartphones will increase and the equilibrium price decreases which causes the equilibrium quantity to increase.

Opponents of minimum wage legislation argue that higher minimum wages serve to?

Increase unemployment, particularly among unskilled teenagers.

When prices increase, the quantity supplied does what?

Increases

If a pharmaceutical company has advances in development and lower costs, what happens to supply?

Increases. Curve shifts right.

Voluntary exchange does what for both parties?

Makes both parties to a trade better off.

What if the increase in demand were larger than the increase in supply? What happens to equilibrium price and quantity?

Price and quantity increases.

What if the increase in demand were smaller than the increase in supply? What happens to equilibrium price and quantity?

Price falls and quantity rises.

In a price system, changes in prices cause what signal to consumers?

Some goods are relatively more or less scarce.

What happens to hamburger supply if the processing costs of beef increases?

Supply will decrease and curve will shift left and prices will increase.

What happens to the supply of automobiles when there is an increase in population?

The demand goes up and the price goes up. downward sloping Demand curve shifts to the right.

The price of orange juice increases. What happens in the industry?

The manufacturers of orange picking machines lay off some workers.

How does the supply curve look on the graph?

Upward sloping

All of the following pairs of goods are substitutes except?

We observe the price of bacon increases and the demand for eggs decreases.

All of the following pairs of goods are complements except?

We observe the price of coffee decreases and the demand for tea decreases.

when market price is ($4) below the equilibrium price ($8) what exists?

a shortage

When 20 units of an item are demanded and 60 are supplied what exists?

a surplus

Economists assume that when there is a change in demand and/or supply, that prices reach a new equilibrium how??

after an adjustment period that varies.

Medical research has shown that grapefruit juice can reduce the effectiveness of certain medications, but there is also evidence that it's consumption can lower cholesterol in young people. The effect on demand is?

cannot be determined because they have opposite effects on demand.

Would there be an increase or decrease in quantity demanded for cable based internet if firms providing wireless (an alternate to cable) reduce their prices?

decrease in demand

Would there be an increase or decrease in quantity demanded for cable based internet if there is a decrease in the incomes earned by consumers of cable based internet access services?

decrease in demand

what does it mean when quantity demanded is the same as quantity supplied?

equilibrium

If the demand and supply curve increases (shift outward) by identical proportions then what happens to equilibrium price and quantity?

equilibrium price stays the same and quantity rises.

If processing costs for beef for hamburgers increase, what happens with the equilibrium price and quantity?

equilibrium price will be higher and the quantity will be lower.

Would there be an increase or decrease in quantity demanded for cable based internet if consumers' tastes shift away from using wireless internet access in favor of cable-based internet access services.

increase in demand

Would there be an increase or decrease in quantity demanded for cable based internet if firms providing cable based internet reduce their prices?

increase in quantity demanded.

If the minimum wage is increased, what happens to the number of unemployed teenagers?

it will increase

What happens to the equilibrium market quantity if supply and demand increases?

market quantity will increase

According to the example in the book, medical research has shown that grapefruit juice can adversely affect the effectiveness of certain medications. This is likely to affect the demand for grapefruit because

people will buy less grapefruit because their tastes and preferences have changed.

When supply increases and the (downward-sloping) demand curve remains in the same position what happens to price and equilibrium quantity?

price falls and equilibrium quantity rises.

Buyers and sellers receive information about what should be bought and what should be produced from where?

prices in a market system.

if more firms are in the market to make automobiles, what happens to the supply?

supply increase and price decreases. Upward sloping Supply curve shifts to the right.

What happens to price if supply and demand increases?

the equilibrium market price will change in an indeterminate way.

In a market-based economy, what is the role of a system of prices?

to address the problem of scarcity.