MICRO CH.3

The graph shows a market where the gov has imposed a price floor. For each of the 3 questions, select the area or areas described after the floor is in place. 1. which of the areas is the consumer Surplus? 2. which of the areas is the producer surplus? 3. What is the deadweight loss of the price floor?

1. A 2. B+E 3. C+F

Suppose the market for dodgeballs is competitive & in equilibrium. What will happen in the market if: 1. games using dodgeballs become hugely popular 2. the price of rubber, an input into the production of dodgeballs, increases assume that all dodgeballs are made of rubber & there are no close substitutes. The competitive equilibrium price .... The competitive equilibrium Quantity....

1. Increases 2. Changes Ambiguously

The graph shows the market for corn with a price ceiling of $7. Fill in the blanks with the correct terms and Numbers. After the price ceiling is in place, how many bushels of corn are bought or sold? The market isn't in equilibrium after the price ceiling is imposed. Rather, there's a (blank) of how many units?

5 Bushels Shortage 5.86 Bushels Solution: 10.86 - 5 = 5.86 shortage At $7, the quantity demanded (10.86 bushels) is greater than the quantity supplied ( 5 bushels). shortage occurs when the supply isn't enough to meet the demand. The amount of a shortage is the difference between the quantity demanded and the quantity supplied.

Which phrase do we use to indicate that we are trying to study the relationship between 2 variables while the values of all other variables are held unchanged?

Ceteris Paribus

Figure shows the supply & demand for online music. you can assume that the online music is a normal good. also select the end result of the equilibrium price & quantity.

Equilibrium Price: Decreases Equilibrium Quantity: Decreases ( for the graph, a fall in household wealth and consumer confidence would reduce the demand of music files at any given price. Hence, demand would shift to the left. In the new equilibrium, where supply meets the new demand, the price & quantity of music files will be lower.)

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

Equilibrium price

Why is this restriction so useful in economic analysis?

If every variable is allowed to change, it would be impossible to isolate the impact of one variable to another

Sort the following scenarios into whether the change in quantity described is caused by a shift in the supply curve or movement along a supply curve. 1. A local Fight Club supplies less of its premium quality soap as a result of lower prices 2. Americans put up their gold and silver jewelry for sale as a result of rising prices

Movement along the supply curve

Decide whether the following scenario will cause a shift in the demand curve or movement along a demand curve. 1. Nettoyer raises the price for its laundry detergent, which results in less sales and strange scents around college dorm floors. 2. Le bureau offers a one weekend clearance sale on its old model of desks, which causes students to rush to upgrade their dorm furniture

Movements along the demand curve

Sort the following scenarios into whether the change in quantity described is caused by a shift in the supply curve or movement along a supply curve 1. After discovering that flash steaming tuna first before using a mechanical processes to extract me remove Fortuna more cans of tuna hit the shows that all major Grocers 2. Amplitude decides to join the smartphone market

Shift of the Supply Curve

Decide whether the following scenario will cause a shift in the demand curve or movement along a demand curve. 1. Out in in a burger joint with an absurd National following in the u.s. sells more Burgers as the price of chicken increases 2. After it earns 1st prize in the spicy category of a ramen tasting comp, college students buy more lamian brand ramen noodles.

Shift of the demand curve

when the market price of a good increases, the amount that sellers are willing to offer for sales increases. This statement is best described as

The law of supply

The Law of Supply explains

The positive relationship between price and quantity supplied

The graph shows the market for milk when the government imposes a price floor of $5. Fill in the blanks with the correct terms & numbers up to 2 decimal places. After the price floor is in place, how many units of milk are bought or sold? The market doesn't clear after the price floor is imposed. Rather, there is a (BLank) of how many gallons?

Units of Milk: 2.93 Gal Surplus 3.66 Gal Solution: sellers are willing to sell 2.93 Gal at this price, whereas the buyers are willing to buy 6.59 Gal. Transactions will take place only if both a willing buyer and a willing seller exist. At $5, not all buyers will find a willing seller, and only 2.93 Gal are exchanged. At $5, The quantity supplied (6.59gal) is greater than the quantity demanded (2.93gal). a surplus occurs when the quantity supplied is greater than the quantity demanded, and the amount of the surplus is the difference between the quantity supplied and the quantity demanded. 6.59gal - 2.93gal = 3.66 Gal

at a price of $12 per movie,

a surplus of 20 movie occurs ( @ prices below equilibrium price, shortage exists. note that $12 per movie is above the equilibrium price of $10 per movie. this involves a surplus. To calculate the size of surplus at 12, you subtract the QD (50 Movies) from the QS ( 70 Movies) for a surplus of 20 movies.)

Producer surplus is shown graphically as the area

above the supply curve and below the market price

In the market economy, there is (blank) relationship between the price of a good and the amount of a good that buyers are willing and able to purchase

an inverse or negative

The basic proposition of the law of demand is that

as the price of a good increases, buyers are willing and able to purchase less

Producer surplus is the difference between

the market price and the minimum price a seller is willing to accept

Consumer surplus is equal to the difference between

the maximum price a buyer is willing to pay and the market price

The concept of demand is best described as

the quantity of a good or a service that people are willing and able to purchase at different possible prices

consumer surplus is shown graphically as the area

under the demand curve and above the market price

A surplus exists

when the quantity supplied exceeds quantity demanded

what is the equilibrium price per movie?

$10

The Maximum amount of a product that sellers are willing and able to provide for sale over a relevant range of prices, holding all other factors constant, is called

Supply

The graph shows a market where the government has imposed a price ceiling. For each question, select the area or areas described AFTER the ceiling is in place. 1. What is the consumer Surplus? 2. What is the producer surplus? 3. What is the deadweight loss of the price ceiling?

1. A+B+E 2. J 3. C+F

Stone & Brick are substitutes in home construction. consider the market for bricks depicted below. 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? Equilibrium quantity?

1. Increases 2. Increases Graph: Demand increases, supply remains the same Solution: Bricks are substitutes for stone. If the price of stone increases, quantity demanded of stone will fall, and the demand for bricks increases. This is illustrated by a shift of the demand curve to the right. At this higher demand curve, the new equilibrium has a higher price and a higher quantity. This is a shift in demand for bricks rather than a movement along the demand curve because its the price of stone that changed demand for bricks. a movement along the demand curve for bricks would come from a change in the price of bricks.

college student ( Andrew), loves drinking coffee late @ night 2 study for exams. Having no income, he's used to buying cheap, bad-tasting coffee, such as Bean lightened, that he needs to grind & brew himself. The coffee tastes putrid but, with enough cream & 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, & he decides he has enough bad-tasting coffee. He ends up buying coffee daily from Starbucks, even though it costs significantly more than Bean lightened. 1) in economic terms, Starbucks coffee is for Andrew a (blank) 2) Bean Lightened coffee is for Andrew a (blank) 3) Andrews demand for Starbucks coffee changed as a result of

1. Normal Good 2. Inferior Good 3. A Change in Income

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 batteries by adjusting the accompanying diagram. Equilibrium Price? Equilibrium Quantity?

1. Decreases 2. Increases Graph: Supply decreases, demand remains the same

The accompanying graph represents the market for coffee. Demonstrate how the market for coffee changes if the price of tea, a substitute for coffee, decreases, and due to better weather, the price of coffee beans also decreases. Equilibrium Price? Equilibrium Quantity? Graph?

1. Decreases 2. May increase, Decrease, or stay the same Graph: Supply Increases, Demand Decreases