Assignment #5

Suppose the market demand curve is given by Q^d=80-10P, and the market supply curve is given by Q^S=10+15P. What is the equilibrium price and quantity?

P= $2.80 and Q= 52

Suppose we observe an increase in both the equilibrium price and quantity of bread. This is best explained by:

A decrease in the price of butter, a complement to bread

"As the price of personal computers continues to fall, demand increases." This headline is inaccurate because:

A falling rice of personal computers increases the quantity demanded, not demand.

Suppose a new study highlights the health benefits of eating bacon. At the same time, suppose the cost of producing bacon falls. Given these changes, you should expect to see:

An increase in the equilibrium quantity of bacon, but it's hard to say what will happen to the equilibrium price.

What might cause a demand curve to shift to the right?

An increase in the price of a substitute

Suppose that the equilibrium price of pickles falls while the equilibrium quantity rises. The most likely explanation for these changes is:

An increase in the supply of pickles.

If the demand for cucumbers falls when the price of tomatoes rises, then we know that tomatoes and cucumbers are:

Complements

Suppose that when the price of oranges is $3 per pound, the quantity demanded is 4.7 tons per day and the quantity supplied is 3.9 tons. In this case:

Excess demand will lead the price of oranges to rise

A decrease in the price of pizza will lead to a(n)

Increase in the quantity of pizza demanded

If an increase in income leads to a decrease in the demand for ground beef, then ground beef is a(n):

Inferior good

Which of the following is NOT true of the equilibrium price?

It is fair in the sense that everyone can afford basic goods and services

If the demand for a good decreases as income decreases, then the good is a(n):

Normal good

If the supply curve and the demand curve both shift to the left, then the new equilibrium:

Quantity will be lower, but the direction of the price change is uncertain

Suppose one knows two facts: first, the market for prescription drugs experiences chronic shortages and second, government sets the price for prescription drugs. One can conclude that the government has:

Set the price below the equilibrium price

Suppose you bought a concert ticket from Ticketmaster for $50, but when you ge to the concert, there are a large number of people waiting outside who offer to pay you more than $50 for your ticket. What is probably true?

There is an excess demand for tickets at the Ticketmaster price.

If supply and demand both decrease, the new equilibrium price will be ___________ and the new equilibrium quantity will be ____________.

Uncertain; lower

Excess demand occurs:

When the price is below the equilibrium price

It is likely that for most people:

coffee and tea are substitutes.