Chapter 4 (LC & HW)

In the market for TVs, the equilibrium price is $500 and the equilibrium quantity is 10,000. What would occur at a price of $600 per TV, assuming nothing in the market changes?

A surplus would be created, and quantity supplied would exceed quantity demanded.

All of these are examples of shortages EXCEPT a: 1. baker reduces the price on her bread because it is going bad before being sold. 2. gas station runs out of gas during a hurricane. 3. pizza shop runs out of pizza with potential customers still in line. 4. pool is at capacity with more people waiting to get in on a hot day.

1

* The cost of lithium‑ion batteries, used for electric cars, has been dropping more steeply than expected. 1. The equilibrium price of electric cars: _____ * 2. The equilibrium quantity of electric cars: ______

1. Decrease 2. Increase

Determine market clearing equilibrium, when you have the supply of two different companies by

1. Identifying the equilibrium price after plotting a price vs quantity graph 2. Returning supply table and noting the quantity for that price

There has been a sudden influx of new residents in the small town of Dallon, leading to a doubling of the local population. How does this sudden influx affect the local market for food? 1. The equilibrium price: ____ * 2. The equilibrium quantity: ____

1. Increases 2. Increases

Lin used to collect baseball cards when she was little. Now that she's grown up, she decides she doesn't really need them and wants to sell them. She decides to list them online and sell them to whoever bids highest. In what kind of market is Lin participating?

An auction

Find the market demand at a given price when the demand table for individuals is given by

At the respective price add the demand of each individual = total market demand

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 prices are high

The price that results when quantity demanded equals quantity supplied is most correctly called the

Equilibrium price

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

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

Mr. Lu decides that he is going to create his own country. He determines that production matters will be determined by the individuals in the market as far as all production and consumption decisions go. What kind of economy has Mr. Lu effectively created?

Market

All of these factors shift the demand curve EXCEPT: 1. Expectations 2. The number and type of consumers. 3. Prices of complements and substitutes 4. Productivity

Productvity

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

The quantity demanded exceeds the quantity supplied.

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's a surplus

In the market for TVs, the equilibrium price is $500 and the equilibrium quantity is 10,000. What would occur at a price of $400 per TV assuming nothing in the market changes?

A shortage would be created, and quantity demanded would exceed quantity supplied.

Recall that the demand curve presents your marginal benefit curve. With this in mind, and with no change in the availability of water, why is it that your willingness to pay for water is relatively small compared to other, nonessential goods? -> You don't ask yourself after 4 units of changes wow suddenly Im even more grateful, you are slightly more - MB: The difference between benefit per unit, concerned with the increase in MB as it changes (ex: getting a little bit more water each month) - TB: Adding all MB per unit as changes

Because your water consumption is based on marginal benefit, not total benefit.

Consider a pair of substitute goods. If the price of one good decreases, then demand for the other good will:

Decrease

You and other college students are deciding whether to major in music or engineering. You learn that there is a shortage of engineers, making it easy for engineering graduates to find employment, while there is a glut of musicians for whom finding a job is difficult. As a result, you and many other college students decide to major in engineering.

Markets tend to move towards equilibrium as individuals respond to incentives.

Mrs. Johnson decides that she is going to create her own country. She determines that she will be in charge of all production matters because she knows how to do things more efficiently than anybody else. What kind of economy has Mrs. Johnson effectively created?

Planned

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

James goes to a concert at the amphitheater by his house. During the encore, the drummer throws one of his drum sticks into the crowd and James catches it. James doesn't have much interest in memorabilia, so he decides to list the drumstick on eBay. In the market for this band's memorabilia, James is a:

Seller

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? -> For him he has created a shortage because he's selling at a price that is below what the production is which means that demand is higher will out-compete the supply as price doesn't meet the cost

Shortage

A surplus exists

When quantity supplied exceeds quantity demanded.

At what point is a market in equilibrium?

When the quantity supplied equals the quantity demanded