EC 2113 Principles of Macroeconomics Chapter 3 Practice Answer
Consider the market for LCD TVs. The market equilibrium is where In this example, the equilibrium price is $_________ and the equilibrium quantity is _______ LCD TVs. (Enter your responses as whole numbers.) Suppose instead that the price of LCD TVs is $2,000This will result in a _____ , which will place _________ pressure on the price.
1400 5000 surplus downward
According to the law of supply,
A and C only
In the table below, fill in the missing blanks to complete the summary of the effects of changes in demand and supply on equilibrium price and quantity.
Supply Curve Unchanged: increase Supply Curve Shifts to the Right: increases, indeterminate Supply Curve Shifts to the Left: decreases
Suppose the equilibrium price and equilibrium quantity of gold both decrease. Which of the following would produce such a change?
The market demand curve for gold could have decreased.
Prices . dollars per player 300 250 200 150 100 Quantity 30 35 40 45 50 The diagram in panel aa is an example of
a demand schedule
Oscar mayer hot dogs and wonder hot do bus ar econsidered to be complementary goods, definitions: substitute goods, complementary good show how a decrease in the prices of oscar mayer hot dogs affects the demand for wonder hot dog buns. When the price of a related good changes, this will result in __________- In particular, when the price of Oscar Mayer hot dogs decreases, the demand curve for Wonder hot dog buns will shift to the
a shift in the demand curve right
The diagram in panel A is an example of
a supply schedule
On the diagram to the right, a movement from A to B represents a
change in quantity demand
Market price is determined by
both supply and demand
Consider the market for PlayStation 4 sPlayStation 4s. Suppose household income decreases. Assume PlayStation 4 sPlayStation 4s are a normal good. When income decrease the demand for PlayStation 4 sPlayStation 4s __________ Instead, consider an inferior good. If income decreases, then the demand for an inferior good __________
decreases. increases
The recession that began in December 2007 resulted in declining incomes as some people lost their jobs and others were forced to work fewer hours or have their wages reduced. How did this affect the market for casual dining? A decrease in income as people lose their jobs will shift the market _______ curve for casual dining. In particular, the demand curve will shift to the
demand left, if casual dining is a normal good
Consider the supply of crude oil on the world market. In August 2011, the price of oil was roughly $80 per barrel. Which of the following changes would increase the supply of oil? The oil supply curve would shift to the right if
future oil prices were expected to be lower.
Consider the market for Ping golf clubs. Suppose the price of memberships at local golf courses increases. Assume memberships at local golf courses and Ping golf clubs are complements. The demand curve for Ping golf clubs will shift to the ________ Instead, suppose the price of tennis rackets decreases. If tennis rackets and golf clubs are substitutes, then the demand for Ping golf clubs will ________-
left decrease
The recent recession that began in December 2007 resulted in declining incomes as some people lost their jobs and others were forced to work fewer hours or have their wages reduced. How did this affect the market for casual diningcasual dining? In the figure to the right, show how the recent recession likely affected the market for casual diningcasual dining. Using the line drawing tool, draw either a new supply curve (Upper S 2S2) or a new demand curve (Upper D 2D2). Properly label your line. Carefully follow the instructions above, and only draw the required object.
make another line below D1 and dont make it to x line or the y line
Consider the market for LCD TVs, illustrated in the figure to the right. Use the point drawing tool to identify the market equilibrium. Properly label this point. Carefully follow the instructions above, and only draw the required objects. Suppose instead that the price of LCD TVs is $800.00. This will result in a ______ which will place ______ pressure on the prices
shortage upward
In the diagram to the right, when the price is $45 per player, the amount of the __________is ____ million players per month.
shortage 14
Suppose supply shifts to the leftleft. The new supply curve should be _________ Furthermore, the new supply curve should______ the original supply curve. With this shift, equilibrium price will________and equilibrium quantity will ________
upward sloping not intersect supply increase decrease
A perfectly competitive market is a market that meets the conditions of
(1) many buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market.
Suppose the price of a substitute to LCD televisions falls. What effect will this have on the market equilibrium for LCD TVs? The equilibrium price of LCD TVs will
decrease and the equilibrium quality will decrease.
According to an article in the Wall Street Journal, a decline in demand for ethanol, which is made from corn, has reduced the demand for corn. Many U.S. farmers can use the same acreage to grow either corn or soybeans. Source: Jesse Newman, "Soybeans and Corn Locked in Food Fight," Wall Street Journal, March 29, 2015. A decline in the demand for corn will This will result in the equilibrium price of soybeans ______ and the equilibrium quantity
shift the soybean supply curve to the right. decreasing increasing
According to the law of demand,
there is an inverse relationship between price and quantity demanded.
The distinction between a normal and an inferior good is
when income increases, demand for a normal good increases while demand for an inferior good falls.
In general, the term "ceteris paribus" means
all else equal.
Consider the market for the Nissan Xterra. Suppose the price of metal, which is an input in automobile production, decreases. When the price of an input changes, this results in a __________ the supply curve In particular, if the price of metal decreases, then the Nissan Xterra supply curve will shift to the _____ When the price of metal decreases, the quantity of Nissan Xterras supplied at any particular Xterra price ___________ Instead, consider the future price of Xterras. If Nissan believes the future price of Xterras will be higherbe higher, then Nissan may ______ supply today
shift in right increases reduce
The effect of an increase in demand is a _____ the demand curve
shift of
chicken noodle soup is considered to be an inferior good. definition: an inferior good show how a decrease in consumer income affects the demand for chicken noodles soup. A change in consumer income will result in ____________. in particular, if consumer income decreases, then the demand for chicken noddle soup will shift to the ________.
a shift in the deman curve right
The figure to the right illustrates the U.S. market for rugs made in a particular foreign country. Suppose the market price of rugs is $1,250. At a price of $1,250, there will be _______ of rugs To reach equilibrium, the prices of rugs in this market must ________
a shortage rise
In the diagram to the right, when demand increases _________ develops at the original prices Equilibrium price will _______ and equilibrium quantity will _______ as a new equilibrium is established.
a shortage rise rise
Consider the market for Hewlett-Packard (HP) printers, depicted in the figure to the right, where the supply of HP printers has increased from S1 to S2. What would cause the supply curve for HP printers to shift to the right?
both a and b a postive technological change a decrease in the prices of a substitute in production
On the diagram to the right, a movement from B to C represents a
change in supply
Suppose there is a postive change in technology Use the line drawing tool to show how this affects the MP3 market by adding either a new supply curve or a new demand curve. Carefully follow the instructions above, and only draw the required objects. As a result of the positive change in technology the positive change in technology, the new equilibrium price will be _________, and the new equilibrium quantity will be ______. Suppose instead that the demand curve shifts to the right. Then, relative to the initial market equilibrium,
lower higher the new equilibrium price would be higher and the new equilibrium quantity would be higher.
Consider the following statement: "An increase in supply decreases the equilibrium price. The decrease in price increases demand." The statement is
false: decreases in price affect the quantity demanded, not demand.
Consider the market for college textbooks. Suppose a recent economic recession has resulted in significantly higher tuition costs for college. Significantly higher tuition costs for collegeSignificantly higher tuition costs for college will shift The new equilibrium will be where In particular, the equilibrium price will ______ and the equilibrium quantity will _________.
the demand curve for textbooks to the left. the new demand curve intersects the supply curve. decrease decrease
After World War II in 1945, the United States experienced a "baby boom" as birthrates rose and remained high through the early 1960s. In 2011, the first members of the baby boom generation became older than 65. What effect will this have on the market for hospital facilities? As the first baby boomers become older than 65, the
demand curve for hospital facilities will shift to the right.
Assume the figure to the right illustrates the market for houses for sale in a small city. Suppose the market price of houses is $200,000. How large will the resulting surplus be? At a price of $200,000, there will be _________ surplus houses. (Enter your response as a whole number.) What is the equilibrium price of houses? The equilibrium price is $_______
400 150000
Consider the market for gasoline, illustrated in the figure to the right. The equilibrium quantity of gasoline is ______ million gallons (enter a numeric response using a real number rounded to two decimal places) and the equilibrium price is $_____ per gallon. If instead the market price were $3.25, then there would be a _____ of _______ million gallons.
5.00 2.50 surplus 3
Which of the following events would cause the supply curve to increase from S1 to S3?
A decrease in the price of inputs
The distinction between substitutes and complements is
substitute goods are used for the same purposes while complementary goods are used together.
According to the law of demandLOADING..., there is an inverse relationship between price and quantity demanded. That is, the demand curve for goods and services slopes downward. Why?
When the price of a good increases, consumers' purchasing power falls, and they cannot buy as much of the good as they did prior to the price change.
According to the law of demandLOADING..., there is an inverse relationship between price and quantity demanded. That is, the demand curve for goods and services slopes downward. Why?
When the price of a good increases, consumers' purchasing power decreases, and they cannot buy as much of the good as they did prior to the price change.
According to an article in the Wall Street Journal, the demand for orange juice is declining in the United States "as newer entrants in the beverage aisle, including more-exotic fruit juices, such as pomegranate, energy drinks and ready-to-drink coffee, have grabbed a greater share of the market." At the same time, orange juice production has been declining as bacterial infections reduce the quantity of fruit that orange trees can produce. The article notes that despite the decline in the demand for orange juice, the price of orange juice might increase. Source: Alexandra Wexler, "U.S. Orange-Juice Sales Fall to Record Low," Wall Street Journal, August 18, 2014. On the graph to the right, assuming that the initial point is 'A', move the cursor to illustrate how the price of orange juice might also increase as a result of these events. Given the scenario described in the article, the price of orange juice could increase if
demand decreased less than the supply decreased.
Suppose the demand curve shifts to the right. The new demand curve should be ______ Furthermore, the new demand curve should _____ the original demand curve with this shift, equilibrium prices will _____ and equilibrium quantity will . ______.
downward sloping not intersect increase increase
Suppose the demand curve shifts to the right and the supply curve shifts to the right by more than the demand curve. The new demand curve will be ______ and the new supply curve will be ________ The new market equilibrium will be where With these shifts, the equilibrium price will _______
downward sloping upward sloping the new demand curve intersects the new supply curve. decrease
Consider the market for PlayStation 4 sPlayStation 4s. Suppose household income decreases. Use the line drawing tool to show how this affects the demand for PlayStation 4 sPlayStation 4s by drawing a new demand curve. Assume PlayStation 4 sPlayStation 4s are a normal good. Properly label this line. Carefully follow the instructions above, and only draw the required objects. According to the graph, when income decreases, the demand for PlayStation 4 sPlayStation 4s _________ Instead, consider an inferior good. If income decreases, then the demand for an inferior good_______.
draw a line and label it D2 decreases increases
Consider the market for Ping golf clubs. Suppose the price of memberships at local golf courses increases. Use the line drawing tool to show how this affects the demand for Ping golf clubs by drawing a new demand curve. Assume memberships at local golf courses and Ping golf clubs are complements. Properly label this line. Carefully follow the instructions above, and only draw the required objects. Instead, suppose the price of tennis rackets increase. If tennis rackets and golf clubs are substitutes, then the demand for Ping golf clubs will ___________
draw a line under d1 and label it d2 increases
Suppose recent changes to immigration laws have increased the supply of immigrant labor, decreasing wages in manual labor occupations. How might this affect the market for construction? In the figure to the right, show how the wage changes have likely affected the market for construction. Using the line drawing tool, draw either a new supply curve (Upper S 2S2) or a new demand curve (Upper D 2D2). Properly label your line. Carefully follow the instructions above, and only draw the required object.
draw another s2 line below the red line
Consider the market for chicken, illustrated in the figure to the right. The market is initially in equilibrium at a price of Upper P 1P1 and at a quantity of Upper Q 1Q1. Suppose the supply curve shifts to the right from Upper S 1S1 to Upper S 2S2 and the demand curve shifts to the right from D1 to D2. Note that in the figure the shift in demand is larger than the shift in supply. As a result of these changes, the new equilibrium price will be ____________ and the new equilibrium quantity will be _________-
higher, higher
Consider the demand for smaller homes illustrated in the figure to the right. What demographic change would likely result in the demand curve for smaller homes shifting to the right? The demand curve for smaller homes would likely shift to the right if the
portion of the population that is elderly increases.
According to one observer of the lobster market: "After Labor Day, when the vacationers have gone home, the lobstermen usually have a month or more of improved fishing conditions, except for the occasional hurricane." Use demand and supply analysis to explain whether lobster prices are likely to be higher or lower during the fall than during the summer. Source: Jay Harlow, "Lobster: An Affordable Luxury," Sallybernstein.com. The supply curve for lobster in the fall is likely to be to the _____ of the supply curve for lobster in the summer. The demand curve for lobster in the fall is likely to be to the____of the demand curve for lobster in the summer. The result of this is that the equilibrium price of lobster in the fall is ______ than the equilibrium price of lobster in the summer.
right left lower
An article discusses the market for autographs by Mickey Mantle, the superstar centerfielder for the New York Yankees during the 1950s and 1960s: "At card shows, golf outings, charity dinners, Mr. Mantle signed his name over and over." One expert on sport autographs is quoted as saying: "He was a real good signer ... He is not rare." Yet the article quotes another expert as saying: "Mr. Mantle's autograph ranks No. 3 of most-popular autographs, behind Babe Ruth and Muhammad Ali." A baseball signed by Mantle is likely to sell for the relatively high price of $250 to $400. By contrast, baseballs signed by Whitey Ford, a teammate of Mantle's on the Yankees, typically sell for less than $150. Source: Beth DeCarbo, "Mantle Autographs Not Rare, but Collectors Don't Care," Wall Street Journal, August 4, 2008. Explain how the price of baseballs signed by Mantle could be higher than the price of baseballs signed by Ford. The supply curve for baseballs signed by Mantle should be an upward-sloping line that is to the __________ of the supply curve for baseballs signed by Ford. In order for the price of baseballs signed by Mantle to be higher than the price of baseballs signed by Ford, the demand curve for baseballs signed by Mantle must be a downward-sloping line that is
right significantly to the right of the demand curve for baseballs signed by Ford.'
Comic book fans eagerly compete to buy copies of Amazing Fantasy No. 15, which contains the first appearance of the superhero Spider-Man. At the same time the publisher printed copies of the comic for the U.S. market, with the price printed on the cover in cents, it printed copies for the U.K. market, with the price printed on the cover in British pence. About 10 times as many U.S. copies of Amazing Fantasy No. 15 have survived as U.K. copies. Yet in auctions that occurred at about the same time in 2013, a U.S. copy sold for $29,000, while a U.K. copy in the same condition sold for only $10,755. Source: Auction price date from: GPA Analysis for CGC Comics, www.comics.gpanalysis.com. The market supply curve for Amazing Fantasy No. 15 in the U.S. is to the ______ of the supply curve in the U.K. The market demand curve for Amazing Fantasy No. 15 in the U.S. is to the ____ of the demand curve in the u.k. In both countries, the market equilibrium is where
right right the demand curve intersects the supply curve.
In early 2017, an article in the Financial Times about the oil market quoted the chief economist of oil company BP as saying: "Pricing pressure is likely to come from the supply side, because of strong growth in US shale oil (crude oil found within shale formations), and the demand side as the rise of renewable energy, including electric vehicles, gradually slows growth in oil consumption." After reading this article, a student argues: "From this information, we would expect that the price of oil will fall, but we don't know whether the equilibrium quantity of oil will increase or decrease." Source: Andrew Ward, "BP Warns of Price Pressures from Long-Term Oil Glut," Financial Times, January 25, 2017. Is the student's analysis correct? In the market for oil, the effect of the increasing use of electric vehicles is the demand curve will _________ In the market for oil, the effect of growth in U.S. shale oil is the supply curve will ______ The new market equilibrium will be where The student's analysis is
shift left shift right the new demand curve intersects the new supply curve. correct
According to a news article on bloomberg.com, the demand for coffee is increasing as "millennials' seemingly unquenchable thirst for coffee is helping to push global demand to a record." At the same time, coffee crops in Brazil and Asia have been hampered by dry weather and droughts. The article notes that "consumption is rising as supplies are getting tighter." Source: Marvin G. Perez, "Coffee-Loving Millennials Push Demand to a Record," bloomberg.com, October 30, 2016. In the market for coffee, the effect of the growth in millennial demand for coffee is the demand curve will_______. In the market for coffee, the effect of dry weather and droughts on coffee crops is the supply curve will ____________. The new market equilibrium will be where The article contains a chart showing changes in worldwide sales of coffee from 2006 through 2016. The chart is labeled, "World demand has expanded in the past decade." Data on the quantity of coffee sold and data on the demand for coffee ______ the same things
shift right shift left the new demand curve intersects the new supply curve are not
Suppose that many cities begin to pass taxes on carbonated sodas, while at the same time scientists discover a cure for citrus greening, which is reducing orange crops in Florida and Brazil. Can we use this information to be certain whether the equilibrium price of orange juice will increase or decrease? Can we use this information to be certain whether the equilibrium quantity of orange juice will increase or decrease? In the market for orange juice, the effect of a tax on carbonated sodas is the demand curve will ________- In the market for orange juice, the effect of a cure for citrus greening is the supply curve will ________ The new market equilibrium will be where The equilibrium quantity of orange juice ______ and the equilibrium price of orange juice ________
shift right shift right the new demand curve intersects the new supply curve. will increase may increase or decrease
The equilibrium price and quantity of a product was $100 and 1,000 units per month in 2015 and is $150 and 800 units per month in 2016. Assume that relative to demand in 2015, the market demand curve shifts to the right. Relative to supply in 2015, the market supply curve ____ The new market equilibrium is where From 2015 to 2016,
shift to the left the new demand curve intersects the new supply curve. supply decreased more than demand increased.
Proposals have been made to increase government regulation of childcare businesses by, for instance, setting education requirements for childcare workers. Suppose that these regulations increase the quality of childcare and cause the demand for childcare services to increase. At the same time, assume that complying with the new government regulations increases the costs of childcare businesses. Given these developments, the demand curve will Additionally, the supply curve will Given these changes, the net effect on equilibrium price is _____, and the effect on equilibrium quantity is _____-
shift to the right, because the quality of childcare increases. shift to the left, because supplying childcare becomes more expensive. an increase, uncertain
Years ago, an apple producer argued that the United States should enact a tariff, or a tax, on imports of bananas. His reasoning was that: "the enormous imports of cheap bananas into the United States tend to curtail the domestic consumption of fresh fruits produced in the United States." Source: Quoted in Douglas A. Irwin, Peddling Protectionism: Smoot-Hawley and the Great Depression, Princeton, NJ: Princeton University Press, 2011, p. 22. This producer apparently assumed apples and bananas to be __________ In a graph (not shown) of the banana market in the United States, the imposition of a tariff on banana imports would ......... The supply curve for apples is _______ The demand curve for apples with the tariff on bananas is farther to the ________ than the demand curve without the tariff on bananas. With the tariff, the market equilibrium for apples is where
substitues shift supply leftward, increasing equilibrium price and decreasing equilibrium quantity. upward sloping right the demand curve with the banana tariff intersects the supply curve.
Consider the market for MP3 players. Suppose there is a positive change in technology A change in technology will shift the ______ curve In particular, if there is a positive change in technology, then the supply curve will shift to the _____ As a result of the positive change in technology, the new equilibrium price will be ______, and the new equilibrium quantity will be _________ Suppose instead that the demand curve shifts to the right. Then, relative to the initial market equilibrium,
supply right lower higher the new equilibrium price would be higher and the new equilibrium quantity would be higher.
Suppose recent changes to immigration laws have increased the supply of immigrant labor, decreasing wages in manual labor occupations. How might this affect the market for construction? A change in worker wages would shift the_______ curve. In particular, a decrease in wages in manual labor occupations would shift the supply curve to the _____
supply right
According to an article in the Wall Street Journal, the demand for orange juice is declining in the United States "as newer entrants in the beverage aisle, including more-exotic fruit juices, such as pomegranate, energy drinks and ready-to-drink coffee, have grabbed a greater share of the market." At the same time, orange juice production has been declining as bacterial infections reduce the quantity of fruit that orange trees can produce. The article notes that despite the decline in the demand for orange juice, the price of orange juice might increase. Source: Alexandra Wexler, "U.S. Orange-Juice Sales Fall to Record Low," Wall Street Journal, August 18, 2014. As a result of these events, the new equilibrium quantity of orange juice As a result of these events, the new equilibrium price of orange juice Given the scenario described in the article, the price of orange juice could increase if
will decrease could increase, decrease, or remain unchanged demand decreased less than the supply decreased.