Chapter 3 Homework

For each example, determine how the market for the good in ALL CAPS will respond to the described change 1. Due to increases in hay prices, an input for raising cattle, the price of A GALLON OF 2% MILK increases from $2.98 to $2.35. 2. A company offers a coupon for $6 off the price of LASER TAG. 3. A sharp increase in the price of wood causes increases I prices for DRESSERS AND DESKS. 4. At a week-long special at the grocery store, PORK SHOULDER is on sale at $1.99/lb, down from $3.99/lb. 5. A website offers a buy-one-get-one-free special for DIGITAL MUSIC ALBUMS. -quantity demanded increases -quantity demanded decreases -quantity demand remains unchanged

1. quantity demanded decreases 2. quantity demanded increases 3. quantity demanded decreases 4. quantity demanded increases 5. quantity demanded increases

Consider the table below. Assuming the law of demand holds, the cell labeled "?" could be which of the following quantities? Price of a movie Quantity of movies demanded $15 175 $17 ? - 177 - 183 - 191 - 175 - 163

163

When the market price of a good increases, the amount the sellers are willing to offer for sale increases. This statement is best described as -the law of supply -the price-quantity principle -the law of large numbers -the maximal quantity curve

the law of supply

This year's expected to be a great one for selling walking shoes in Georgia. At very low prices, only most efficient shoemakers are able to sell. There are two shoe producers that operate with the most cost-effective equipment and skilled personnel, each of which can put 1000 pairs of shoes I the market at $10.00. At a higher price, eight more shoemakers will enter the market. Each producer makes 1200 pairs of shoes at $25 per pair. If the price goes to $40.00 per pair, the existing firms increase production to 1400 pairs of shoes each, plus four small shops open, each of which produces 500 pairs of shoes. Using the information above, graph the supply curve for walking shoes by dragging the provided red points to the correct coordinates of price and quantity.

SEE CH. 3 Q6

The maximum amount of a product that sells are willing and able to provide for sale over a relevant range of prices, holding all other factors constant, is called -profit maximization -sales volume -supply -maximal output

Supply

In a market economy, there is __________ relationship between the price of a good and the amount of a good that buyers are willing and able to purchase.

an inverse or negative

The basic proposition of the law of demand is that -as the price of a good decreases, buyers are willing and able to purchase less -higher prices cause buyers to demand more -buyers demand lower prices -as the price of a good increases, buyers are willing and able to purchase less -higher prices cause less demand

as the price of a good increases, buyers are willing and able to purchase less

The law of supply explains -the negative relationship between price and quantity demanded -the positive relationship between price and quantity supplied -the negative relationship between price and quantity supplied -the positives relationship between price and quantity demanded

the positive relationship between price and quantity supplied

The concept of demand is best described as -the additional satisfaction derived from a quantity of goods and services obtained when income increases -the quantity of a good or service that people will offer for sale at different possible prices -the total satisfaction that consuming a good proves people at different prices -the quantity of a good or service that people are willing and able to purchase at different possible prices

the quantity of a good or service that people will offer for sale at different possible prices