Micro Exam 1

Categorize each scenario as describing a movement along a demand curve or a shift of the demand curve.

-College students reduce how much detergent they use for each load of laundry in response to higher detergent prices. : movement along the demand curve -College students rush and buy discount furniture to take advantage of an unexpected price drop. : movement along the demand curve -College students purchase many more energy drinks during finals week than during the rest of the semester. : shift in the demand curve -Students eat out more often as the federal government increases how much grant money it provides students. : shift in the demand curve

Determine how the equilibrium price and equilibrium quantity in the market for coffee changes if A) the price of tea, a substitute for coffee, decreases, B) and due to better weather, the price of coffee beans also decreases.

-Equilibrium price decreases -Equilibrium quantity stays the same

Determine how the equilibrium price and equilibrium quantity in 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 decreases -Equilibrium quantity stays the same

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 increases -Equilibrium quantity decreases

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 increases -Equilibrium quantity increases

Classify each of the scenarios as an "either-or" decision or a "how much" decision.

-Jake needs to stay awake as he studies for his midterm tomorrow. What quantity of coffee does Jake drink? (MARGINAL OR "HOW MUCH") -Marvin goes to his favorite buffet to eat Chinese food and sometimes overeats and leaves the buffet with a stomach ache. (MARGINAL OR "HOW MUCH") -After graduation from law school, Frank is offered one job in New York and one in Chicago. Where should Frank work? (EITHER OR) -Bella is accepted to 4 graduate school programs. Where should she go to school? (EITHER OR)

What is the biggest problem facing Command Economies (socialism)?

Coordination and incentives to direct output

What are the 5 shifters of supply

Price of Resources Technology Government involvement Number of sellers Expectations

Suppose the accompanying graph depicts a market for one pound bags of candy. Place the line labeled Excess Demand at a price that would generate an excess demand (shortage). Then, determine the size of the excess demand.

Excess demand = 4 million bags

Match the institution with the role it plays in the coordination of resources in decentralized economies.

Markets: brings buyers and sellers together to carry out mutually beneficial exchanges Property Rights: established rules for ownership of resources and creates incentives for innovation Firms: organizes resources in order to produce goods and services Money: allows for the exchange of goods and services using a common unit as a measure of value that is generally accepted as payment

What are the 5 shifters of demand

Preferences Number of buyers Price of related goods Income Expectations