Chapter 3 and 5

The accompanying supply and demand graph represents a hypothetical market for spaghetti pasta. Demonstrate how an increase in the price of penne, a different type of pasta, and a decrease in the price of meatballs will affect the supply and demand of spaghetti pasta. Assume that producers of spaghetti pasta do not also produce penne.

Demand curve shift to the right

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 ___. Equilibrium quantity ___.

Equilibrium price increases. Equilibrium quantity decreases.

The table contains information on the price per month and the monthly demand and supply of online music streaming subscriptions. What are the equilibrium price and quantity?

Equilibrium price: $10.10 Equilibrium quantity: 390 thousand subscriptions

The demand curve is a graphical representation of ___.

the relationship between price and quantity demanded

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-ion batteries by adjusting the accompanying diagram. Equilibrium price ___. Equilibrium quantity ___.

Equilibrium price decreases. Equilibrium quantity increases.

Stone and 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 ___.

Equilibrium price increases. Equilibrium quantity increases.

Suppose that there has been a sudden influx of refugees in the small town of Dallon, leading to a doubling of the local population. The accompanying graph depicts Dallon's market for food. Adjust the graph to show the immediate impact that this rise in population has on the food market. Then determine what happens to equilibrium price and quantity. Equilibrium price ___. Equilibrium quantity ___.

Equilibrium price increases. Equilibrium quantity increases.

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

Suppose the accompanying graph depicts a market for one pound bags of candy. Place the point labeled Excess Supply to show a price that would generate an excess supply (surplus). Then, determine the size of the excess supply.

Excess Supply = 6 million bags

The accompanying graph contains individual supply curves for the only two firms in a hypothetical market for stuffed animals. Place the market supply curve at the correct location on the graph. What happens to the market if a third supplier enters the market, holding all else constant? 1. The emergence of a third supplier will result in higher prices of stuffed animals. 2. Market supply increases. 3. Firm 1 and Firm 2 will lower output to accommodate the new supplier in order to keep market supply constant. 4. Market supply decreases.

Market supply increases

Classify each scenario according to whether the change in quantity is caused by a shift in the supply curve or movement along the supply curve. 1. Americans sell their gold and silver jewelry as a result of rising prices 2. After discovering that flash-steaming tuna before using mechanical processes to extract meat removes more tuna flesh, more cans of tuna arrive on the shelves at all major grocers 3. Amplitude decides to join the smartphone market 4. A national consumer products company producers less of its premium quality soap as a result of lower soap prices

Shift of the supply curve: - After discovering that flash-steaming tuna before using mechanical processes to extract meat removes more tuna flesh, more cans of tuna arrive on the shelves at all major grocers - Amplitude decides to join the smartphone market Movement along the supply curve - A national consumer products company producers less of its premium quality soap as a result of lower soap prices - Americans sell their gold and silver jewelry as a result of rising prices

During the Obama administration, the development of low-cost batteries for electric cars received large amounts of federal funding in terms of subsidies. Meanwhile, American households gave a higher priority towards minimizing their environmental impact. Consider the market for zero-emissions electric vehicles where there is an upward-sloping supply curve and a downward-sloping demand curve. 1. Which direction will demand and supply shift? 2. What will happen to the equilibrium price? 3. What will happen to the equilibrium quantity?

1. Both curves will shift right 2. Change is ambiguous 3. Quantity increases

The table contains information on the price per month and the monthly demand and supply of online music streaming subscriptions. 1. What is the quantity demanded at $11.40? 2. What is the quantity supplied at $11.40? 3. At what price is the quantity supplied equal to 170,000?

1. Quantity demanded is 150 thousand subscriptions 2. Quantity supplied is 270 thousand subscriptions 3. $11

For each example listed, decide if the good is a normal good or an inferior good. Billy's mom increases his weekly allowance by $5. As a result, Billy increases the number of apps he downloads on his smartphone. Smartphone apps are ___.

A normal good

According to the law of demand ___.

a decrease in price increases quantity demanded

The accompanying table contains the individual demand schedules of dark chocolate for Vanessa and Angela. Assuming they are the only people in the market for dark chocolate, place each of their individual demand curves and the market demand curve at the correct locations on the accompanying graph. After a while, Angela gets sick of eating the bitter chocolate and decides to cut back on dark chocolate and enjoy white chocolate more. What happens as a result of Angela's decision? Select all of the correct answers. 1. The market demand for dark chocolate will decrease. 2. Angela's individual demand for white chocolate increases. 3. Angela's individual demand for dark chocolate decreases. 4. Vanessa's individual demand for dark chocolate increases to compensate for Angela's decreased demand.

1. The market demand for dark chocolate will decrease. 2. Angela's individual demand for white chocolate increases. 3. Angela's individual demand for dark chocolate decreases.

The accompanying graph represents a hypothetical market for luxury automobiles. Suppose that a major luxury car producer exits the market in order to produce more economy cars. At the same time, a market research group reports that the average price of a luxury car is increasing and the number of luxury cars sold is increasing. Manipulate the graph to demonstrate what must be happening to supply and demand.

Demand shifts rightward Supply shifts leftward

Categorize each scenario as describing a movement along a demand curve or a shift of the demand curve. 1. College students purchase many more energy drinks during finals week than during the rest of the semester 2. College students rush and buy discount furniture to take advantage of an unexpected price drop 3. College students reduce how much detergent they use for each load of laundry in response to higher detergent prices 4. Students eat out more often as the federal government increases how much grant money it provides students

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

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

1. normal good 2. inferior good 3. change in income

The figure shows the supply and demand for online music. Suppose that an economic downturn decreases household wealth and erodes consumer confidence. Move the supply and/or demand curves to reflect the primary effect this would have on the market for online music. You can assume that online music is a normal good. Also, select the end result of equilibrium price and quantity. Equilibrium price ___. Equilibrium quantity ___.

Equilibrium price decreases. Equilibrium quantity decreases.

The demand schedule for chicken feet, a dim sum delicacy served at some Chinese restaurants, is shown in the table. Although some people find the texture strange, others have developed a taste for it. How many more chickern feet were demanded in 2018, at a price of $1.00 a pound, than in 2008? ___ million pounds Based on the deman schedule, you conclude ___.

8.1 The demand curve shifted to the right

For each example listed, decide if the good is a normal good or an inferior good. Hair stylist Molly loses a few of her clients. Molly cuts back on the number of smooties she buys during the week. Smooties are ___.

A normal good

For each example listed, decide if the good is a normal good or an inferior good. Mike is an appliance salesman. Refridgerator sales in his store have fallen and so has his commission. Mike decides to switch from name brand cereal to generic cereal. Generic cereal is ___.

An inferior good

For each example listed, decide if the good is a normal good or an inferior good. Susan gets a 15% performance bonus at work. She can finally stop eating so many frozen pizzas and eat something more tasty. Frozen pizzas are ___.

An inferior good

The accompanying graph depicts a hypothetical market for analog TVs. In June 2009, the U.S. Federal Communications Commission (FCC) mandated that all over-the-air television broadcasts originating in the U.S. must be broadcast digitally instead of the traditional analog signal. These digital transmissions cannot be decoded by traditional analog TVs but require either a digital decoder be attached to an analog TV or a natively digital TV. Both sellers and consumers were made aware of the upcoming switch from analog transmission to digital several years before the mandate took effect. Demonstrate on the graph how the market for analog TVs changed immediately following the announcement of the switch to digital. For the supply side, focus on the end seller (such as an electronic store) of a TV and not the manufacturer.

Demand shifts leftward Supply shifts rightward

The accompanying graph represents the supply of printer ink cartridges. The current price of ink (per cartridge) is $20 and indicated by the point on the supply curve. Suppose the price of cartridges increases to $24. Illustrate on the graph how the market for Ink Cartridges changes.

There is a shift up the supply curve