Econ 202 Chapter 4 Homework

Suppose the price of eggs increases and the demand for bacon decreases. From this information you conclude that these goods must be

complements

We can make the assumption of holding all else equal when considering demand curves since we wan to focus on the change in the quantity demanded that result from changes in ___________.

on the price of a good

What is meant by holding all else equal and how is this concept used when discussing movements along the demand curve?

All variables that can affect the demand for the good other tan its own price are held constant.

Suppose the university is trying to determine the most efficient way to allocate the rooms such that those who value the rooms the most get them. Which of the following would you suggest as the method to achieve that goal?

Finding the highest price at which all the rooms would be rented and charging that price.

Does the shape of the market demand curve differ from the shape of an individual demand curve?

No, they both tend to be downward-sloping curves.

Land in Sonoma, California, can be used to either grow grapes for pinot noir wine or to grow Gravenstein apples. Given this information, what is the relationship between pinot noir wine and Gravenstein apples?

They are related in supply, because the same land can be used to produce either.

In a perfectly competitive market, sellers _______________ and buyers ______________.

cannot charge more than the market price; cannot pay less than the market price

Suppose a new off-campus university apartment complex could rent all of its rooms on the open market if it charged $900 a month. If, instead, the university chooses to cap the price of rooms to $500 a month for students, the result would be that

quantity demanded would exceed the quantity of these rooms available.

market demand is derived by

fixing the price and adding up the quantities that each buyer demands.

In a perfectly competitive market, if one seller choose to charge a price for its good that is slightly higher than the market price, then it will

lose all or almost all of its consumers

The Law of Supply states that as the price of a good increases, ceteris paribus, the _____________ of that good increases.

quantity supplied

when one of the four major factors changes, causing an increase in supply, the supply curve shifts

rightward

excess demand

shortage

Coffee and tea are likely _____________ because an increase in the price of coffee increases the demand for tea.

substitutes

excess supply

surplus

major factors that shift the supply curve when it changes

the scale of sellers, sellers' beliefs about the future, prices of inputs used in production