MICRO Exam #2 Practice Questions
The elasticity of demand for a price cut from 10 to 9 is
2.5
If price elasticity of demand for a good is 3, then a 10% increase in price would be expected to result in a
30% decrease in quantity demanded
Bread is discovered to cause cancer. We would go from the solid curve to curve
A
Bread is declared illegal by the U.S. government, and anyone found in possession of bread is fined and sent to jail. We would go from the solid curve(s) to curve(s)
A and C
Which of the following will not increase the demand for burritos?
A big burritos sale
Which of the following will increase the supply of wheat?
A decrease in the price of fertilizer
Which of the following will NOT increase the demand for porcelain tea sets?
A fall in the price of porcelain
Which of the following will increase the demand for snowboards?
A fall in the price of ski lift tickets
Which of the following will increase the demand for tea?
A rise in the price of coffee
A supply curve shows
All of the above
Which of the following will increase the supply (i.e., shift the supply curve) of brass key rings?
An improvement in key ring-making technology
The two graphs above show (in order from top to bottom)
An increase in demand, a decrease in supply
Which of the following would not be expected to decrease the demand (shift the demand curve) for grape soda?
An increase in the price of grape soda
Which of the following would not be expected to reduce the demand (shift the demand curve) for peanut butter?
An increase in the price of peanut butter
A rise in income will tend to
Any of the above, depending on the product and your preferences
The price of wheat rises sharply. We would go from the solid curve to curve
C
What does the graph show?
Demand has increased; supply has increased
What would happen in the market for beef salami if the prices of both baloney (a substitute) and cattle feed fall? (draw the curves!)
Equilibrium price would decrease but the effect on quantity would be uncertain
The equilibrium price and quantity are
P3Q3
A new type of netting increases the productivity of tuna fisherman. What happens to the equilibrium price and quantity of tuna?
Price decreases; quantity increases
Researchers discover that chocolate reduces weight when consumed in large quantities. What happens to the equilibrium price and quantity of chocolate?
Price increases; quantity increases
At a price of P1, consumers are willing to buy what quantity of gasoline?
Q4
Which is most likely to be the long-run supply curve?
S1
Which of the following would best explain the change in the strawberry market?
Strawberry allergies have killed 100 people
If demand is elastic, we would expect
a big change in quantity when price changes
The law of demand states that
as prices go up, quantity demanded goes down
The demand curve represents _____ while the supply curve represents _____
benefits, costs
Which of the following would reduce the demand for orange juice?
A decrease in the price of grape juice
If that graph represents the market for peanut butter, which of the following might have caused the change?
A decrease in the price of jelly
Which of the following would cause an increase in the demand for potato chips?
A fall in the price of dip if dip and potato chips are complements
Which of the following is most likely to increase the demand for motorcycles?
A fall in the price of motorcycle helmets
Which of the following will increase the demand for waffles (shift the demand curve outwards)?
A fall in the price of waffle syrup
Which of the following will NOT increase the demand (shift the demand curve) for coffee?
A great coffee harvest
Which of the following will NOT increase the supply of titanium golf clubs?
A rise in the demand for golf clubs
Which of the following will lead to an increase in the demand for satellite TV?
A rise in the price of Netflix (a substitute)
Which of the following will increase the demand for frisbees?
A rise in the price of nerf footballs (a substitute)
Which of the following is most likely to have been responsible for the rise on the cost of hiring university faculty?
A rising demand for college faculty
Which of the following will increase the quantity of photocopiers supplied?
All of the above
Which of the following will increase the number of umbrellas sold?
All of the above will increase the number of umbrellas sold
Which of the following will NOT increase the quantity of coffees demanded?
All of the above will increase the quantity of coffee demanded
Which of the following will not increase the demand for rice (i.e., will not shift the demand curve)?
An unusually good rice harvest
At which price is there excess demand and at which price is there excess supply?
At 8 there is excess demand and at 15 there is excess supply
Bread is discovered to cure baldness at the same time terrorists destroy the major American bakeries. We would go from the solid curve(s) to curve(s)
B and C
Why does quantity demanded fall as price rises?
Because people switch to substitutes
For which of the following is demand likely to be the most elastic?
BiLo's Wheat sourdough bread
What would happen in the market for interior house paint if the price of paintbrushes falls while the price of wallpaper (a substitute) rises?
Both equilibrium price and quantity would increase
If the supply of tea increases, what would we expect to happen in the market for coffee (a substitute)?
Both price and quantity to fall
Which of the following is the most plausible explanation for the changes?
Cocaine is legalized
Which of the following would best explain the changes?
Cocaine is legalized just as a blight reduces the cocoa (the raw material for cocaine) crop
Which of the following is least likely to increase the number of burritos that Moe's burrito shop sells?
Consumer income falls, and burritos are a normal good
What does the graph show has happened in the market for staplers?
Demand has decreased; supply has decreased
What does the graph show has happened in the market?
Demand has decreased; supply has decreased
What does the graph show?
Demand has decreased; supply has increased
In the curves above, demand has shifted from D1 to D2. What has happened?
Demand has increased, price has increased, and quantity has increased
What does the graph show?
Demand has increased; supply has increased.
If the supply of peanut butter increases, what would we expect to happen in the market for tuna (a substitute for peanut butter on sandwiches)?
Demand to decrease
What would you expect to happen when winter arrives?
Demand to shift to D1
What would you expect to happen if it is discovered that breathing rose fumes causes cancer?
Demand to shift to D1 and supply to shift to S1
What would you expect to happen if it is discovered that handling bike frames reduces the risk of cancer? (hint: bike workers handle bike frames, too)
Demand to shift to D2 and supply to shift to S2
Doug likes tomatoes now more than he did last year. Therefore
Doug is willing to pay more for tomatoes than last year
Suppose that the price of Hershey bars (a substitute) falls and the price of peanuts (an input) rises. What would you expect to happen to the price and quantity of Snickers bars on the market?
Equilibrium quantity would decrease, but the impact on equilibrium price would be uncertain
Suppose that the price of a substitute for good X falls and the price of the raw materials used to manufacture good X increases. What would you expect to happen in the market for good X?
Equilibrium quantity would decrease, but the impact on equilibrium price would be uncertain
Suppose that the price of orange juice rises and the price of apples falls. What would you expect to happen to the price and quantity of apple juice? (DRAW THE CURVES!)
Equilibrium quantity would increase, but the impact on equilibrium price would be uncertain
Suppose that the supply of root beer (a complement) increases and the price of cream (an input) falls. What would you expect to happen to the market price and quantity of ice cream?
Equilibrium quantity would increase, but the impact on equilibrium price would be uncertain
What would happen in the market for news programs if the salaries of anchormen and women fall while the price of newspapers (a substitute) rises?
Equilibrium quantity would increase, but the impact on equilibrium price would be uncertain
Assume the two graphs refer to a single market, the market for widgets. As a result of the changes, we would expect
Higher widget prices
Which of the following is true?
It takes a higher price to get 75 units supplied than to get 75 units demanded
If the demand function is QD= 40-2P and price rises by 10, what will happen to quantity demanded?
It will fall by 20
Which of the following will decrease the supply (i.e., shift the supply curve) of chocolate cakes?
Just a and b
For which product is demand likely to be the most elastic?
Kellog's Raisin Bran at BiLo
Which of the following is most likely to increase the demand (i.e., shift the demand curve) for downtown parking?
Lower gasoline prices
Which of the following will increase the supply of photocopiers?
New technology that makes it possible to manufacture photocopiers much more cheaply
Which of the following is/are true?
None of the above
What are the market-clearing price and quantity for mirrors?
Price = $2, quantity = 10
What are the market-clearing price and quantity?
Price = $5, quantity = 6
A new report shows that most sardines have high mercury content (mercury is harmful to humans). What happens to the equilibrium price and quantity of sardines?
Price decreases; quantity decreases
Good weather produces an unexpectedly abundant cocoa crop. What happens to the equilibrium price and quantity of chocolate (cocoa is an ingredient in chocolate production)?
Price decreases; quantity increases
A major oil spill wipes out a substantial portion of ocean cod. What happens to the equilibrium price and quantity of cod?
Price increases; quantity decreases
At a price of P1, oil companies are willing to sell what quantity of gasoline?
Q1
According to the curves above, at a price of P1 suppliers are willing to sell ____ and demanders are willing to buy ____ gallons of gasoline
Q1, Q4
By contrast, at the equilibrium price, suppliers are willing to sell ____ and demanders are willing to buy ____ gallons of gasoline.
Q3, Q3
Suppose that now-illegal drugs are legalized, increasing both the supply and demand. We would expect (Draw the curves!)
Quantity to go up, but the effect on price to be uncertain
In the graph above, for which curve is supply the least elastic at price P1?
S3
Which of the following is the most plausible explanation for the changes?
Scientists discover that drinking coffee makes you ugly, while a new technology reduces the cost of growing coffee
Which of the following is the most plausible explanation for the changes?
Scientists discover that either making or eating pizza makes you much better-looking than you were before
Which of the following will increase the supply of oranges?
Terrific orange growing weather
What would happen in the market for pizza in restaurants if the price of flour increased and the price of a meal in a Chinese restaurant increased?
The equilibrium price of pizza would increase, but the impact on the amount of pizza sold would be uncertain
Illegal immigration substantially reduces wages in the chocolate industry at the same time researchers discover that eating chocolate makes you fat. What happens to the equilibrium price and quantity of chocolate?
The equilibrium price will decrease, but the effect on equilibrium quantity is uncertain
The government bans the use of coal-fired chocolate furnaces (the cheapest way of producing chocolate), at the same time consumer income increases (chocolate is a normal good). What happens to the equilibrium price and quantity of chocolate?
The equilibrium price will increase, but the effect on equilibrium quantity is uncertain
What would happen in the market for silk shirts if the price of silk falls while the price of cotton shirts (a substitute) also falls?
The equilibrium price would decrease, but the impact on equilibrium quantity would be uncertain
What would happen in the market for pens if both the price of ink (an input) and the price of pencil lead falls? (Hint: lead pencils are substitutes) (DRAW THE CURVES!)
The equilibrium price would decrease, but the impact on quantity would be uncertain
What would happen in the market for ramen noodles if the price of wheat (an input) falls while consumer income rises (ramen noodles are an inferior good)?
The equilibrium price would decrease, but the impact on quantity would be uncertain
Suppose that the price of oranges and apples rises. What would you expect to happen to the market price and quantity of orange juice? (Hint: apple juice is a substitute) (DRAW THE CURVES!)
The equilibrium price would increase, but the impact on equilibrium quantity would be uncertain
What would happen in the market for grape jelly if a bad grape harvest accompanies an exceptionally good peanut harvest (peanut butter and grape jelly are complements)?
The equilibrium price would increase, but the impact on equilibrium quantity would be uncertain
What would happen in the market for skis if there is a lot of snow (which makes skiing more fun) but this also makes it more difficult to ship skis into town? (DRAW THE CURVES!)
The equilibrium price would increase, but the impact on quantity would be uncertain
The price of marshmallows (a complement to chocolate consumption) rises while war in Oompaloompia disrupts international deliveries of chocolate. What happens to the equilibrium price and quantity of chocolate?
The equilibrium quantity will decrease, but the effect on equilibrium price is uncertain
A decrease in oil prices makes it cheaper to transport chocolate to market while the price of peppermint (a substitute) rises. What happens to the equilibrium price and quantity of chocolate?
The equilibrium quantity will increase, but the effect on equilibrium price is uncertain
What would happen in the market for corn tacos if the price of corn increased while the price of wheat tacos (a substitute) decreased? (DRAW THE CURVES!)
The equilibrium quantity would decrease but the impact on price would be uncertain
What would happen in the market for shredded wheat cereal if the price of wheat decreased while the price of corn flakes (a substitute) increased? (DRAW THE CURVES!)
The equilibrium quantity would increase but the impact on price would be uncertain
Which of the following would make the demand for education at Clemson more elastic?
The founding of four more universities in South Carolina
For which of these goods would demand be least elastic?
all breakfast foods
At the intersection of the supply curve and the demand curve
all of the above
For which of the following is there a market?
all of the above
If a frost kills a significant amount of the Brazilian coffee crop, we can expect
all of the above
In the market pictured above, at a price of $5
all of the above
Prices are important because they
all of the above
Suppose Clemson passes a law that forbids the construction of new houses within city limits. We would expect
all of the above
The demand curve shows _______ and the supply curve shows ______
all of the above
Which of the following would make the demand for Pepsi more elastic?
The launching of five new brands of cola by five different companies
Which of the following would increase demand for aardvark meat?
The new belief that eating aardvark makes you beautiful
The demand for snowboards depends upon
all of the above
The development of a lower cost way of making wheat flour
all of the above
The market-clearing price is
all of the above
Which of the following will increase the market price of coffee?
all of the above
Which of the following will increase the quantity of coffee consumed?
all of the above
Which of the following will increase the quantity of surfboards demanded?
all of the above
Which of the following will increase the demand (shift the demand curve) for mahogany desks?
all of the above but B
If a good is "normal," an increase in income will result in
an increase in demand for the good
A supply curve slopes upwards because
an increase in price gives producers incentive to provide a larger quantity
Suppose the price of tea increases. As a result, we would expect to see
an increase in the demand for coffee (a substitute)
If Clemson raises the price of on-campus parking, you would expect to see
an increase in the demand for off-campus parking
Which of the following is the most plausible explanation for the changes?
The price of basketball players rose while the price of NHL hockey games (a substitute) fell
The price of paper clips fell, while the cost of producing staplers rose
The price of paper clips fell, while the cost of producing staplers rose
Which of the following would cause a decrease in the demand for coffee?
an increase in the price of sugar if you drink your coffee with sugar
The thing least likely to change the demand (shift the demand curve) for a university education is
an increase in university tuition charges
We observe that the price of paper clips has risen and the quantity being sold on the market has fallen. Which of the following is the most likely explanation?
The supply of paper clips has decreased
Which of the following is the most important advantage to a society of using money rather than relying exclusively on barter?
The use of money lowers the cost of exchanging goods
Which of the following is least likely to shift the demand for the burrito that Moe's burrito shop sells?
They hold a big burrito sale
How do buyers and seller coordinate their desires?
Through their independent effect on prices
Which of the following would lead to an increase in both the equilibrium price and quantity of an inferior good, such as macaroni and cheese?
a decrease in consumer income
Which of the following would lead to an increase in both the equilibrium price and quantity of an inferior good, such as macaroni and cheese?
a decrease in income
A demand curve is
a generally downward-sloping line relating the price of a good with the quantity demanded
Supply and demand are always more elastic in the long-run because
a greater range of actions can be taken in longer periods
Which of the following would cause both the equilibrium price and the equilibrium quantity of pears to decrease?
a lower price for apples
A decrease in the supply of aluminum bicycles could result from
a rise in the price of aluminum
A decrease in the supply of aluminum bikes (i.e., a shift in the supply curve) could result from
a rise in the price of aluminum
If a price rise of 9% leads to a rise in quantity supplied of 12%, we know that supply is
elastic
If you calculate the elasticity of demand for a cut in the price of unicorns from $6 to $5, you will find that demand is
elastic
If you drop your prices and total revenue increases, demand must be
elastic
In other words, going from a price of $16 to a price of $17, demand is
elastic
If the price of tickets to Chicago Bears games rises by 10% and the quantity demanded rises by 8%, we can conclude that demand for Bears tickets
has increased
If the demand for french bread is elastic and the baker holds a french bread sale
he will sell a lot more bread
Which of the following would you expect to have the least elastic demand?
headache medicine
Anything that increases the value that potential buyers receive from a good may be expected to
increase demand
A "normal good" is a good for which
quantity demanded rises when income rises
At the price of 8,
quantity supplied is about 20, while quantity demanded is about 40
If land suitable for shopping centers may also be used for go-cart tracks, an increase in the demand for go-cart driving will
raise the cost of building shopping centers
An increase in the demand for rental apartments will
raise the price and increase the quantity supplied
A rational decision-maker takes action only if
the marginal benefit is greater than the marginal cost
Which of the following is NOT an important determinant of the level of demand?
the price of inputs
If the price of grapes falls
the quantity of grapes demanded increases
A demand curve indicates the value consumers get from a good. It is measured a
the quantity people will buy at various prices
When there is excess supply
there is downward pressure on price
If supply increases, we would expect that the quantity demanded at $50
will equal 150
If the firm charges a price of $80, its total revenue equals
$12000
If the firm charges a price of $16, its total revenue equals
$800
What is the elasticity of demand for an increase in the price of unicorns from $1 to $2?
0.1
If you raise price from 5 to 10 and the quantity you sell falls from 20 to 15, the elasticity of demand for your product is
0.25
If price is raised from 10 to 12 and quantity supplied rises from 100 to 108, elasticity of supply equals
0.4
If a firm making widgets lowers its price by 10 percent and finds that it sells 8 percent more widgets, the elasticity of demand for its product equals
0.8
If you raise your price by 50% and quantity demanded falls by 40%, the elasticity of demand for your product is
0.8
We can then expect the total amount spent on coffee to rise if the elasticity of demand is
0.8
At what price is quantity demanded greatest? At what price is quantity supplied greatest?
1,7
If the price is raised from $3 to $5 what is the change in quantity demanded?
2
If the price is raised from $3 to $5, what is the change in quantity supplied?
2
At what which of the following prices will the most kumquats actually be sold (i.e., change hands from seller to buyer)?
3
Because the demand for wheat tends to be inelastic, the development of a new, more productive hybrid wheat would tend to
decrease the total revenue of wheat farmers
A change in safety regulation that decreases the demand and increases the supply of airline flights will
decrease ticket prices
What happens in the market for tires when the cost of aluminum (an input to automobile production) increases?
demand decreases
A frost that destroys half of Florida's orange crop will make orange growers unhappy only if
demand for oranges is elastic
It seems that every year around Valentine's day the price of roses rises sharply. This is probably because
demand for roses increases
If equilibrium price in a market has risen from $1 to $5 and the equilibrium quantity has risen from 100 to 500, we would know that
demand has increased
If you discover that the equilibrium price and quantity of soybeans has risen, you would conclude that
demand has increased
What happens in the market for ink when the price of the lead used to make pencils rises?
demand increases
A normal good is one for which
demand increases when income increases
If you are told "Nobody will buy more of that product even if they cut the price in half," you can conclude that
demand is inelastic
If you read in the newspaper that the price of a product has risen, and that the quantity of the product sold on the market has risen as well, you know that
demand must have increased
if price and quantity both increase, you know that
demand must have increased
What would you expect to happen if incomes rise and cameras are a normal good?
demand shift to D2
What would you expect to happen if the price of cameras falls sharply?
demand shift to D2
If the supply of orange juice increases, what would we expect to happen in the market for apple juice (a substitute)?
demand to decrease
If the supply of snowboards increases, what would we expect to happen in the market for skis (a substitute)?
demand to decrease
If the supply of tea increases, what would we expect to happen in the market for coffee (a substitute)?
demand to decrease
If the supply of peanut butter increases, what would we expect to happen in the market for jelly (a complement)?
demand to increase
What would you expect to happen on Valentine's Day (hint: people buy roses for their Valentines)?
demand to shift to D2
The price of ham rises sharply. What happens to the equilibrium price and quantity of cheese (ham and cheese are complements)?
both price and quantity fall
When demand decreases
both price and quantity fall
When the demand for something falls
both price and quantity fall
What happens to the equilibrium price and quantity of tomato juice after the hurricane (orange juice and tomato juice are substitutes)?
both price and quantity rise
When the demand for something increases
both price and quantity rise
If price is raised by $2 and quantity falls by 20 percent, the elasticity of demand
can not be determined without more information
When you go to the supermarket you find that there is exactly the kind of deodorant you wanted on the shelf. This is because
changes in price spurred by the actions of many different consumers indicate to Safeway the level of demand
A friend of yours tells you that despite the price of coffee reaching an all-time high, coffee growers are drinking more coffee than they did before the price rise. An explanation of this that fits with economic thinking is that
coffee farmers have been made wealthier by the increase in coffee prices and thus increase their demand for coffee
The fact that more teachers per student are employed now than 20 years ago (i.e., equilibrium quantity has increased) tells us that
either demand or supply has increased
If equilibrium price has fallen from $5.50 to $4.75, we would know that
either supply has increased or demand has decreased
When the supply and demand for a good both increase,
equilibrium price may increase, decrease, or remain unchanged
At a price of $1, there will be
excess demand
If the unicorn rancher sets price equal to $6, there will be
excess supply
Which of the following would you expect to have the least elastic demand?
food
A rise in demand
forces price and quantity up
Which of the following will not decrease the supply of burritos?
he discovery that eating burritos causes cancer
If instead there is a major frost in Florida that kills fifty percent of the orange crop, we would expect to see
higher orange prices
If you paid $25,000 for your car just a short while ago, but the best offer you can get for it now is $12,000. You should only sell the car
if its worth to you is less than $12,000
The law of supply predicts that
if price goes up, quantity supplied will not fall whether or not demand changes
A businesswoman says "No matter how much we cut price, we just don't seem to get any new customers." In other words, she thinks demand for her product is
inelastic
Coffee growers will be happy about the frost only if demand is
inelastic
If a 10% increase in the price of beer reduces the quantity demanded by 8%, then demand for beer is
inelastic
If a good is a necessity, demand for that good would tend to be
inelastic
If price rises from 10 to 12 and quantity demanded falls by 12%, we know that demand is
inelastic
If you raise price from $1.00 to $1.50 and quantity demanded falls from 20 to 15, you know demand for your product is
inelastic
Demand for a "necessity" is likely to be ______, while demand for a "luxury" is likely to be _____.
inelastic, either elastic or inelastic
The economic model
is about how people make choices
If a 25% increase in the price of skateboards reduces the quantity demanded by 500, then demand for skateboards
is downward sloping, but there is not enough information to calculate the elasticity
If a $1 increase in price reduces the quantity demanded by 10%, we know that demand
is downward sloping, but we don't have enough information to calculate the elasticity
We therefore know that at the price of 8, demand for the product
is elastic
An article in the newspaper suggests that an Indian tribe should use coal rather than gas power because the tribe owns 114 billion tons of coal reserves. This statement
is false because it ignores opportunity costs
The concept of opportunity cost suggests that the cost to airlines of allowing employees to fly for free
is greater at Christmas than in mid-February
If the demand for bread increases, what would we expect to happen to the quantity of wheat supplied?
it to go up
Suppose you like to make and eat coconut cream pies. What will a rise in the price of coconuts do to your demand for cream? (draw the curves!)
it will decrease
It is considering raising its price to $17. If it does so
its total revenue will decrease, because the percent increase in price is less than the percent decrease in quantity demanded
It is considering raising its price to $90. If it does so
its total revenue will decrease, because the percent increase in price is less than the percent decrease in quantity demanded
If a frost destroys much of the Florida orange crop
just A and B
Which of the following will increase the quantity of brass key rings supplied?
just A and C
The firm is currently charging a price of 8. If it wants to increase its sales revenue, it should
lower price to 7
Suppose you sell jewelry boxes, and a business consultant you have hired determines that demand for your product is elastic. If you want to increase your total revenue, you should therefore
lower the price of your jewelry boxes
The demand for Kellogg's Corn Flakes tends to be very elastic because
many other cereals are almost perfect substitutes
An increase in the price of oranges
may be caused either by an increase in demand or a decrease in supply
The demand for this product
may be elastic or inelastic, depending on the price
The demand for potatoes tends to be less elastic than the demand for movies because
movies have better and closer substitutes
An increase in the price of gasoline
none of the above
Which of the following will increase the market price of chocolate eclairs?
none of the above
The supply curve slopes upward because
opportunity costs rise with the quantity supplied
Demand for maple nut ice cream tends to be elastic because
other flavors of ice cream are almost perfect substitutes
Which of the following is likely to have the least elastic supply?
paintings by Rembrandt
If the price of peanut butter increases and the demand for jelly increases as a result, then
peanut butter and jelly are substitutes
Which of the following would you expect to have the least elastic demand?
penicillin
Doctors charge high fees because
people are willing to pay high fees for medical services
The law of demand would lead you to expect that if the price of butter goes up,
people will buy more margarine
If a supplier can sell as much as it wants at $10 per unit, but none at all at $10.01, we know that the demand it faces is
perfectly elastic
"A doubling in gasoline prices has not reduced purchases at all." The speaker evidently believes that demand for gasoline is
perfectly inelastic
The quantity supplied will increase with an increase in price only if supply is not
perfectly inelastic
"Elasticity" measures the relationship between
price and quantity
As a result,
price and quantity both increase
As a result
price and quantity have a fallen
If the price of cattle feed falls, what happens to equilibrium price and quantity of beef?
price falls and quantity rises
As a result of the changes
price has fallen and quantity has risen
As a result of the changes in the stapler market,
price has risen and quantity has fallen
A hurricane destroys half of California orange groves. What happens to the equilibrium price and quantity of orange juice?
price rises, quantity falls
Demand is said to be inelastic if
quantity demanded moves proportionately less than price
The market clearing price of a good is the price at which
quantity supplied equals quantity demanded
The "law of demand"
says that people buy less of a good when price rises
The "law of demand"
says that people don't buy more of a good when price rises
Suppose that a fall in the price of good X causes less of good Y to be sold. This would mean that X and Y are
substitutes
If instead the new equilibrium price and quantity are P3 and Q4, you would know that
supply and demand had both increased
What happens in the market for beef when the price of ranching land rises?
supply decreases
If some time later you learn that P4 is the new equilibrium price and Q2 is the new equilibrium quantity, you would know that
supply had decreased
If equilibrium price in a market has risen from $10 to $25 and the equilibrium quantity has fallen from 50,000 to 35,000, we would know that
supply has decreased
If equilibrium price in a market has risen from $5 to $10 and the equilibrium quantity has fallen from 100 to 50, we would know that
supply has decreased
If then you discover that you were mistaken, and that, although the price had risen, the equilibrium quantity of soybeans has actually fallen, you would know that
supply has decreased
If equilibrium price has fallen from $5.50 to $4.75 while equilibrium quantity has risen from 10,000 to 12,000, we would know that
supply has increased
What happens in the market for cream cheese when the price of cream (an input) falls?
supply increases
If quantity supplied responds only slightly to a change in price, then
supply is inelastic
If price decreases and quantity increases, you know that
supply must have increased
What would you expect to happen if the price of the chemicals used to make film rises?
supply shift to S1
If the supply of "roots" (an input) increases, what would we expect to happen in the market for root beer?
supply to increase
If the price of bike tires rises, we would expect
supply to shift to S1
If the cost of fertilizer falls, we would expect
supply to shift to S2
What would an increase in the price of diamonds do to the supply of diamond rings?
supply would decrease
If someone tells you that they "can't live without" something, you would assume,
that their demand is likely to be inelastic
This is because
the change in demand is greater than the change in supply
This is because
the change in demand was smaller than the change in supply
Elasticity of demand depends on
the closeness of substitutes
The marginal cost of taking your car for a spin around the block includes which of the following
the cost of the gas you use up driving around the block
The supply curve for pasta reflects
the cost of the wheat from which pasta is made
If I tell you that the price of cameras has fallen and the number sold has fallen rather than risen, you would know that
the demand for cameras has decreased
If the price of coffee falls and the quantity of coffee demanded falls as well, we know that
the demand for coffee has fallen
If you discover that the price of college education has risen and the number of students seeking to enroll has increased as well, you would know that
the demand for college education has increased
If Clemson decides to increase tuition so as to raise its revenues, it must believe that
the demand for education at Clemson is inelastic
If the price of batteries rises, you would expect
the demand for electricity to increase
Professional football players receive on average much higher wages than professional soccer players in the United States because
the demand for football games is greater
If the price of a substitute for good X increases, then
the demand for good X increases
If peanut butter and jelly are complements, as the price of jelly goes up,
the demand for peanut butter goes up
What effect would a reduction in the U.S. selling price of Japanese-made cars have on the U.S. demand for American-made cars?
the demand would decrease
A technological breakthrough reduces the cost of pie crust. What is the effect on the market for cherry pies? (Hint: consider whether demand or supply or both change)
the equilibrium price decreases; the equilibrium quantity increases
What is the effect on the market for cherries? (Hint: consider whether the demand for cherries or the supply of cherries or both change)
the equilibrium price increases; the equilibrium quantity increases
If the price of olives rises just as new studies reveal additional health benefits from using olive oil, we would expect (draw the curves!)
the equilibrium price of olive oil to rise, but the effect on quantity to be uncertain
If you hear that a terrible frost has ravaged the California citrus crop, you would expect (draw the curves!)
the equilibrium price of orange juice to rise and the quantity to fall
If an unusually cold summer discourages people from eating ice cream while lowering the cost of storing ice cream, we would expect(Draw the curves!)
the equilibrium price to fall, but the effect on quantity to be uncertain
If an exceptionally snowy winter makes for great skiing conditions but also raises the cost of shipping-in skis, we would expect (DRAW THE CURVES)
the equilibrium price to rise, but the effect on quantity to be uncertain
If a new technology is developed that allows twice the soybeans to be grown at half the cost, and at the same time a new soybean drink becomes the hottest thing in town, we would expect (DRAW THE CURVES)
the equilibrium quantity to rise, but the effect on price to be uncertain
Jon needs 200 cases of Cristal champagne to cater a wedding. First, Jon visits all the wine shops located within ten miles, but can't get enough cases. Then Jon visits all wine shops located between 10 and 50 miles, but still is short a few cases. Finally Jon visits all wine shops located within 50 and 100 miles, and gets the last few cases he needs. Jon's struggles illustrate
the law of supply
Good economic decisions are those for which
the marginal benefits are greater than the marginal cost
Suppose a landmark court case makes it more expensive to run Day Care centers, but also makes it less likely that children cared for will be harmed. We can expect
the price of Day Care services to increase
If there is excess demand for burritos, we would expect
the price of burritos to rise
If Florida has a bumper orange crop, we can expect that
the price of grapefruit will fall if grapefruit and oranges are substitutes
If the elasticity of demand of for camera film is 2.6, and the price of film is raised by 10 percent,
the quantity demanded will fall by 26 percent
The recent drought in the Midwest has been severe, and experts say that roughly half the corn crop has been damaged. As a result, we would expect:
the supply of corn to decrease
If the price of silver falls, you would expect
the supply of silver jewelry to increase
If I tell you that the price of snowboards has risen and the quantity of snowboards on the market has fallen, you know that
the supply of snowboards has decreased
If the supply of a good is absolutely fixed (like wine bottled in 1983)
the supply will be vertical
If there is excess demand for farm laborers, we would expect
the wage paid to farm laborers to rise
When the price of a good or service changes,
there is a movement along the demand curve
If quantity demanded falls by 100,000 when price rises by 2 cents, we know that
there is not enough information to calculate elasticity
If we raise price by 10 cents and quantity demanded falls by 10,000 units, we would conclude that
there is not enough information to determine whether demand is elastic or not
Buyers and sellers communicate primarily
through their willingness to buy and sell at various prices
In economics, the cost of something is
what you must give up to get it
If supply increases, we would expect that the quantity supplied at $50
will be greater than 20
When you are a student, you are more likely to go by bus; once you have a job, you are more likely to fly. This is because once you have a job
your demand for transportation becomes less elastic since your opportunity costs increase
