Micro - CH 3 Questions

According to the law of demand, a) a decrease in price increases demand. b) an increase in income increases demand. c) an increase in price decreases demand. d) a decrease in price increases quantity demanded.

d) a decrease in price increases quantity demanded.

Andrew, a college student, loves drinking coffee late at night to study for exams. Having no income, he is used to buying cheap, bad-tasting coffee, such as Beanlightened, that he needs to grind and brew himself. The coffee tastes putrid but, with enough cream and sugar, Andrew is able to tolerate it. Occasionally, he does go out to Starbucks when he has spare money. After graduation, Andrew gets a job working at a database firm as a programmer. His income is now a healthy $75,000 a year, and he decides he has had enough bad-tasting coffee. He ends up buying coffee daily from Starbucks, even though it costs significantly more than Beanlightened. a) a change in expectations. b) a change in the number of consumers. c) a change in a related good or service. d) a change in technology. e) a change in income. Beanlightened coffee is for Andrew a(n)...

e) change in income inferior good

The accompanying graph represents a hypothetical market for luxury automobiles. Suppose that a major luxury car producer exits the market in order to produce more economy cars. At the same time, a new tax law means that many tax payers will receive large refunds this year. According to a marketing firm, the result is a higher quantity of luxury cars selling at higher prices. Manipulate the graph to demonstrate what must be happening to supply and demand.

Demand shifts to the right , supply shifts to the left

Demonstrate how an increase in the price of penne, a different type of pasta, and a decrease in the price of meatballs will affect the supply and demand of spaghetti pasta. Assume that producers of spaghetti pasta do not also produce penne.

increases demand

Suppose the cost of lithium-ion batteries, an input into the production of electric vehicles, has dropped more steeply than expected. The accompanying graph depicts a market for electric vehicles. Demonstrate the effect of a reduction in the price of lithium-ion batteries by adjusting the accompanying diagram. Equilibrium price... a) remains constant. b) decreases. c) increases. d) may increase or decrease, but it is impossible to know for sure. Equilibirum quantity... a) remains constant. b) increases. c) decreases. d) may increase or decrease, but it is impossible to know for sure. What happens to demand and supply?

b) DECREASES b) increases supply shifts to the right, demands stays the same

The figure shows the supply and demand for online music. Suppose that an economic downturn decreases household wealth and erodes consumer confidence. Move the supply and/or demand curves to reflect the primary effect this would have on the market for online music. You can assume that online music is a normal good. Also, select the end result of equilibrium price and quantity. Equilibrium price... a) remains constant. b) decreases. c) increases. d) may increase or decrease, but it is impossible to know for sure. Equilibirum quantity... a) remains constant. b) increases. c) decreases. d) may increase or decrease, but it is impossible to know for sure. What happens to demand and supply?

b) decreases c) decreases demand shifts to the left, supply stays the same

Stone and brick are substitutes in home construction. Consider the market for bricks depicted in the graph. Suppose the price of stone increases due to new regulations for the stone quarrying industry. Illustrate the impact this will have on the market for bricks. Equilibrium price... a) remains constant. b) decreases. c) increases. d) may increase or decrease, but it is impossible to know for sure. Equilibirum quantity... a) remains constant. b) increases. c) decreases. d) may increase or decrease, but it is impossible to know for sure. What happens to demand and supply?

c) increases b) increases demand shifts to the right

The U.S. government has subsidized ethanol production since 1978. With the advent of affordable electric cars, policymakers are considering whether to allow the subsidy to expire. The accompanying graph represents the market for ethanol. Move the supply and/or demand curves to show how reducing the subsidy will affect the ethanol market. Equilibrium price... a) remains constant. b) decreases. c) increases. d) may increase or decrease, but it is impossible to know for sure. Equilibirum quantity... a) remains constant. b) increases. c) decreases. d) may increase or decrease, but it is impossible to know for sure. What happens to demand and supply?

c) increases c) decreases supply shifts to the left

Suppose that there has been a sudden influx of refugees in the small town of Dallon, leading to a doubling of the local population. The accompanying graph depicts Dallon's market for food. Adjust the graph to show the immediate impact that this rise in population has on the food market. Then determine what happens to equilibrium price and quantity. Equilibrium price... a) remains constant. b) decreases. c) increases. d) may increase or decrease, but it is impossible to know for sure. Equilibirum quantity... a) remains constant. b) increases. c) decreases. d) may increase or decrease, but it is impossible to know for sure. What happens to demand and supply?

c) increases b) increases demand shifts to he right, supply stays the same