Micro Assignment 3

Suppose that in the market for computer memory chips, the equilibrium price is $50 per chip. If the current price is $55 per chip, then there will be _______ of memory chips.

a surplus

A price ceiling will result in a shortage only if the ceiling price is the equilibrium price.

less than

Critically evaluate: "In comparing the two equilibrium positions in the diagram below, I note that a smaller amount is actually demanded at a lower price. This refutes the law of demand."

a. A decrease in demand from D1 to D2 results in- excess supply. b. This causes the price to- fall c. This change in price results in in quantity demanded along the D2 demand curve.- an increase d. This change in price results in in quantity supplied.- a decrease e. The new equilibrium has a and a when compared to the original equilibrium. -Lower price, lower quanity f. Does this refute the law of demand: . No g. Why: Because there was a change in demand

What are the determinants of demand?

* Income * Price of related goods * Tastes and prefrences

What are the determinants of supply?

* Technology *Resource prices *Number of producers

A change from point A to point C =

A change in demand

A change from point A to point B =

A change in quanity demanded

Indicate whether a change in the value of each of the following determinants of demand leads to a movement along the demand curve or a shift in the demand curve.

*Change in market price: movement along demand curve *Change in income: shift in demand curve Change in consumer expectations: shift in demand curve Change in the price of a related good: shift in demand curve Change in the price of an unrelated good: no change Change in preferences for this good: shift in demand curve

Indicate whether a change in the value of each of the following determinants of supply leads to a movement along the supply curve or a shift in the supply curve.

*Change in market price: movement along the supply curve *Change in factor productivity: a shift in the supply curve *Change in producer expectations: a shift in the supply curve *Change in the price of other goods: a shift in the supply curve *Change in technology: a shift in the supply curve *Change in resource prices: a shift in the supply curve * Change in taxes: a shift in the supply curve

Given the following diagram, indicate whether these changes represent a change in supply or a change in quantity supplied.

A change from point A to point B = a change in quantity supplied A change from point A to point C = a change in supply

True or False: A "change in quantity demanded" is a shift of the entire demand curve to the right or to the left.

False

For each stock in the stock market, the number of shares sold daily equals the number of shares purchased. That is, the quantity of each firm's shares demanded equals the quantity supplied. So, if this equality always occurs, why do the prices of stock shares ever change?

Prices change in reaction to a mismatch between Qd and Qs.

What effect will each of the following have on the supply of auto tires? (Keeping all else constant)

a. A technological advance in the methods of producing tires: Increase b. A decline in the number of firms in the tire industry: Decrease c. An increase in the prices of rubber used in the production of tires: Decrease d. The expectation that the equilibrium price of auto tires will be lower in the future than currently: Increase e. A decline in the price of large tires used for semi trucks and earth-hauling rigs, a substitute in production. (with no change in the price of auto tires): Increase f. The levying of a per-unit tax on each auto tire sold: Decrease g. The granting of a 50-cent-per-unit subsidy for each auto tire produced: Increase

What effect will each of the following have on the demand for small automobiles such as the Mini-Cooper and Fiat 500?

a. Small automobiles become more fashionable: Increase b. The price of large automobiles rises (with the price of small autos remaining the same): Increase c. Income declines and small autos are an inferior good: Increase d. Consumers anticipate that the price of small autos will greatly come down in the near future: decrease e. The price of gasoline substantially drops: Cannot be determined