Unit 4: Demand Supply Market Forces

What is the equilibrium price for milk as shown on this graph?

$3

Match the term with the correct example. 1. Inelastic demand 2. Elastic demand

1. Insulin 2. Jewelry

According to this graph what happened to the equilibrium price when the demand curve shifted?

Equilibrium price increased.

The demand curve

slopes down to the right

Based on this graph, which price and quantity is correct in this market?

$8, 8

Match the terms with their definitions. 1. What is given up when one more unit is produced. Ex additional utility charges due to keeping the store open later. 2. Sum of the fixed and variable costs, the cost of production. Ex. the total monthly operating expenses for a store or factory. 3. A cost that changes when production increases or decreases. Ex shipping costs 4. A cost that does not vary based on production or sales. Ex. Rent 5. The money left over after all of the expenses are paid.

1. Marginal cost 2. Total cost 3. Variable cost 4. Fixed cost 5. Profit

Match the demand shifter with the correct example. 1. When you go to the store pick up a box of cereal and remember to get some milk and bananas too. 2. Have you noticed the many advertisements for goods that seniors want. There are so many commercials for canes, walkers, depends, and arthritis medication. There must be a lot of aging baby boomers out there. 3. The Weather Channel foretasted snow for Atlanta and North Georgia. I decided to stop at the store for supplies. The supermarket was totally out of bread, milk, and flash lights. 4. With the economy recovering and Wall St having a great year, the price of housing in Lower Manhattan has skyrocketed. 5. The model looks great in those skinny jeans. I think I will store the bell bottoms and get some new jeans. 6. We were going to have steak for our cook out but the price has gone sky high. We will have chicken again.

1. Number of Consumers 2. Consumer Tastes 3. Expectations 4. Complement 5. Consumer Income 6. Substitute

Match the term with the correct definition. 1. A second supply curve has been introduced into the market due to a change in the market place other than price. 2. the amount producers will offer for sale at any given price 3. a graph showing the quantities supplied at every price 4. a direct relationship; suppliers offer more for sale at higher prices 5. a table listing the quantities supplied at various prices

1. Supply change or shift 2. Quantity Supplied 3. Supply Curve 4. Law of Supply 5. Supply schedule

Match the example with the correct term. 1. The call center instituted an automated answering and redirect phone system and can now serve more customers. 2. New deposits of natural gas have been discovered in Pennsylvania. 3. The company decided to shift production from golf balls to tennis balls due to increasing popularity of tennis as a recreational sport. 4. The government is backing low interest loans for businesses developing solar energy. 5. Following Hurricane Katrina, Georgians experienced fuel shortages. 6. Lately it seems that frozen yogurt shops are popping up in every neighborhood shopping center.

1. Technology innovation 2. Resources 3. Other Goods 4. Taxes and subsidies 5. Natural disasters 6. Number of supplies

Match the terms with their descriptions. 1. Diminishing Marginal Utility 2. Total Utility 3. Income Effect 4. Substitution Effect 5. Marginal Utility

1. The more we get of an item, the less useful the next unit of that item is. 2. The total satisfaction from consuming some commodity 3. There is a change in quantity demanded as price changes. This means that as something gets cheaper, we have extra more money left over which means we might buy more of that item. 4. There is a change in quantity demanded because of the change in relative price. This means that as something become more expensive, you are more likely to buy a different good that satisfies the need or want. 5. The extra usefulness or satisfaction that a person gets from getting one more unit of an item.

According to this graph, at $8 consumers will be willing to purchase _________.

2 pies

What is the equilibrium quantity in this table?

3

According to this demand schedule at $6 consumers will be willing to buy __________.

3 pies

According to this supply table at $4 per pie, bakers are willing to supply ___________.

3 pies.

Which of the following scenarios could this graph illustrate?

A new airline began to service Atlanta providing more international flights.

The demand for baby strollers has increased due to a rising birth rate among the "baby boomer bubble". Which graph best illustrates this situation.

D is pointing outwards to D1

Which of the following items determine whether a good a service has elastic demand? Select as many as apply.

If the good is a necessity or luxury, Percentage of household budget taken by the good, If the purchase of the good or service can be delayed without harm, Availability of substitutes for a good or service

How is the equilibrium price determined?

It is based on trial and error in the market place.

How is the "total receipts test" used in economics?

It is used to determine elasticity of demand.

Which of the following organizations would fall into the category of a cartel because it sets prices and production level for the industry?

OPEC (Organization of Petroleum Exporting Countries)

Which of the following scenarios might be illustrated by this graph?

Super Cycle when out of business and fewer bicycles are supplied at every price.

We have to distinguish between a change in quantity demanded and a change or shift in demand. Select all of the options that indicate a shift or change in demand.

The price of a complementary good goes up., The standard of living and income levels rise in the country.

If these lines represented demand for SUV's what happened between D, the original line, and D1 the new curve?

The quantity of SUV's demanded increased because the price was lowered.

In the condition of market equilibrium,

There is no shortage or surplus of goods and services.

Assuming that the blue line is the original supply curve, then the green line illustrates

a shift or decrease in quantity supplied.

Price floors usually legislate prices that are

above equilibrium price.

The graph shows ______________from Q1 to Q2.

an increase in demand

Assuming that the blue line is the original supply curve, then the red line indicates

an increase in quantity supplied.

Because there is only one line on this graph and it slopes downward to the left it illustrates

changes in quantity supplied.

f the price of hamburger goes down during the summer cook out season, then _________________________.

demand for buns is likely to increase.

Let's say Fantastic Sport introduces a new line, Rapid Running Shoes. It sends them to retailers at a very low price. What would you expect to happen?

equilibrium

In this graph the arrow is pointing to

market equilibrium

Because the items in the photo are nearly identical to each other we say that the market structure is

perfect competition.

The line indicated by the red arrow illustrates a

price ceiling

Minimum wage laws mandate a type of

price floor

The red arrow in this illustration is pointing to a line that represents a

price floor

Which of the following is an example of a price ceiling?

rent controlled apartments in Manhattan

Price ceilings can lead to __________in the market place.

shortage

What market condition exists in the market place at the price goods are offered as indicated on this graph?

shortage

The market or equilibrium price is the point where

supply offered by producers equals demand from consumers.

What condition happens in the market place at the price shown in this graph?

surplus

The law of demand is based on an inverse relationship which means that

the higher the price of the good or service, the less the consumer will be willing to buy.