Econ 2030 Chapter 4

For the given graph, equilibrium price is ____ and the equilibrium quantity is ____.

$8; $15 units

A change in which of the following can shift the demand curve for a good?

-Taxes paid by and subsidies paid to by the consumer -Tastes and preferences of the consumers -Expectations of the consumers in the future price of the good

Which of the following can shift the demand curve for a good?

-The price of another good rises. -The income of the consumers falls.

The law of demand states that the quantity demanded

1. falls as price rises -If the price of something goes up, people will tend to buy less of it and more of something else. This is the law of demand. 2. rises as price falls. -If the price of something goes down, people will tend to buy more of it and less of something else. This is the law of demand.

At a price of $10, the quantity supplied will be

20 units

In the graph, the demand curve is represented by

A

In the graph shown, the supply curve is best represented by

B

A change in the price of a good causes a shift in the demand curve.

False

change in the price of a good causes a shift in the demand curve.

False -Changes in factors other than price shift the demand curve.

The false assumption that what is true for the whole will also be true for the part is called the fallacy of composition.

False -The false assumption that what is true for the PART will also be true for the WHOLE is called the fallacy of composition.

The given graph shows the demand for a good increasing from D0 to D1. The new equilibrium price of the good is:

P2

Why do prices tend to be in equilibrium where supply and demand intersect?

The forces that push down on price and the forces that push up on price are about equal.

Excess supply is the amount by which quantity supplied exceeds quantity demanded.

True

Equilibrium is not preferred to disequilibrium.

True -Equilibrium is a characteristic of a model; it has no normative dimension and thus is not necessarily preferred to disequilibrium.

At a price of $10, there is

an excess supply of 10 units.

The law of supply states that the quantity supplied of a good is

directly related to the good's price. -The law of supply states that as price rises, quantity supplied rises. Price and quantity are directly related.

The demand curve is generally

downward sloping because as price rises, quantity demanded tends to fall.

At a price of $5, there is

excess quantity supplied of 6 units.

When upward pressure on price is exactly offset by the downward pressure on price, a market is said to be

in equilibrium. -Supply and demand assume competition. When forces cancel themselves out, the market is said to be in equilibrium.

A movement along a demand curve can be caused by a change in the

price of the good.

Excess demand is the amount by which:

quantity demanded exceeds quantity supplied.

The law of demand states that a rise in price will cause

quantity demanded to fall. -If the price of something goes up, people will tend to buy less of it and more of something else. This is the law of demand.

Excess supply is the amount by which

quantity supplied exceeds quantity demanded

The law of supply states that quantity supplied

rises as input prices fall. -As price rises, people rearrange their activities to supply more of the good.

Quantity supplied refers to a

specific amount that will be supplied per unit of time at a specific price, other things constant.

In the real world, we would expect that quantity

supplied and quantity demanded might, but often won't, be equal.

At a price of $24, there is an excess

supply of 4 units. -At $24, quantity supplied is 8 and quantity demanded is 4. There is excess supply of 4.

Graphically, supply refers to

the entire supply curve

When supply decreases

the entire supply curve shifts to the left.

A typical supply curve is

upward sloping.

Supply tells us how much will be bought at

various prices.