Topic 3: Demand and Supply

Questions that include graphs

4,12-16

Currently you purchase 6 packages of hot dogs a month. You will be graduating in December and will start your new job January 2nd. You have no plans to purchase hot dogs in January. For you, hot dogs are

an inferior good.

In the market for bananas, the price is $2.00 a bunch. An increase in the supply of bananas decreases the price of bananas and ________.

increases the quantity of bananas demanded

Which of the following would NOT shift the demand curve for a good or service?

a change in the price of the good or service

We know that HDTVs have seen a significant fall in price over recent years. We also know that this fall in price have been caused by significant decreases in the cost of producing HDTVs. In terms of the supply and demand analysis this is explained by

A shift to the right of the supply curve

The Colombian ministry of Agriculture announced that an unexpected frost has destroyed one third of this year's Colombian coffee crop. In the United States, which is a large importer of Colombian coffee, the effect of the frost would

Lower the equilibrium price of coffee pots, a coffee complement

Which chain of events occurs in the correct order?

Demand increases, price increases, quantity supplied increases.

The CNN reports an outbreak of mad cow disease in the US. If chicken and beef are substitutes, how will these developments affect the equilibrium price and quantity of chicken sold in the US.

Equilibrium price increases; equilibrium quantity increases.

Suppose that demand decreases AND supply decreases. What would you expect to occur in the market for the good?

Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.

Which of the following is most likely to increase the price of smart phones?

The development of Apps that makes it easier to use smart phones (Lower product costs increase supply. Reduction of income and future price expectation, and increase in prices of Apps lower demand. Development of apps increases smartphone demand.)

What will happen to the equilibrium price of new textbooks if more students attend college, paper becomes cheaper, textbook authors accept lower royalties and fewer used textbooks are sold?

The price change will be ambiguous. (There are increases in both demand and supply. The price change is ambiguous.)

Beef and leather belts are complements in production. If people's concern about health shifts the demand curve for beef leftward, the result in the market for leather belts will be a

higher equilibrium price for a leather belt because there is a decrease in the supply of leather belts.

If goods A and B are complements, an increase in the price of A will result in

less of good B sold.

Two goods are substitutes if a decrease in the price of one good

reduces the demand for the other good.

Holding the non-price determinants of supply constant, a change in price would

result in a movement along a supply curve.

A technological improvement lowers the cost of producing coffee. At the same time, consumers' preferences for coffee increase. The equilibrium price of coffee will

rise, fall, or stay the same, depending on the relative size of the shifts in the demand and supply curves.

A technological improvement lowers the cost of producing coffee. At the same time, consumers' preferences for coffee increase. The equilibrium price of coffee will

rise, fall, or stay the same, depending on the relative size of the shifts in the demand and supply curves. (Again, there are increases in both demand and supply. The price change is ambiguous)

The demand for a good increases when the price of a substitute ________ and also increases when the price of a complement ________.

rises; falls

If the cost of computer components falls, then

the supply curve for computers shifts to the right.