Micro2 MC (S&D&Elasticity Ch3)
Why is the purpose of a price ceiling is to help consumers by lowering the legal price of the product?
A maximum legal price below equilibrium may help some consumers by lowering prices, but the price ceiling causes a shortage.
How will a tariff on sugar imports affect price and quantity of sugar?
An import tax on sugar will reduce production and, as a result, the price of sugar will increase.
Why is the curve shifts No change Increase, when it would definitely cause both the equilibrium price and equilibrium quantity to increase?
An increase in demand definitely causes both price and quantity to increase. A is eliminated because both cause price to fall; B is eliminated because both cause quantity to fall. C and D cannot create the result.
What effect will an increase in productivity have on supply of the product?
Higher productivity allows firms to produce more at every price. Increased demand causes a change in quantity supplied (a move along the supply curve) but not a shift in the supply curve.
What is the Law Demand?
The Law of Demand says that at lower prices, people buy more and at higher prices, people buy less.
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When ducks are slaughtered for meat, their feathers can be used in the production of pillows. Given this relationship, if the demand for duck meat rises, what will happen to the price of pillows?
Because duck meat and feathers are harvested together, the increase in the quantity of duck meat supplied will result in a greater supply of feathers, reducing the cost of pillow production. The increase in feather pillow supply lowers the price of feather pillows.
In a competitive shoe market, if consumer incomes rise at the same time that the cost of production rises for shoes, what would one definite result be?
Because the increase in demand (caused by higher incomes) and the decrease in supply (caused by higher costs of production) both result in higher prices, the combination will definitely cause the price to increase.
What effect will a significant increase in price of bicycle helmets have on bicycles?
Bicycles and helmets are complements; if the price of helmets increases significantly, demand for bicycles would be expected to fall.
Which of the following would increase the supply of cell phones? I. The government levies a per-unit tax on the producers of cell phones. II. The number of cell phone producers increases. III. Technological advances lower the per-unit cost of cell phone production. IV. The cost of cell phone components increases.
Both an increase in the number of cell phone producers (II) and technological advances lowering the per-unit costs of cell phone production (III) increase the supply curve for cell phones (supply curve shifts rightward).
A drought occurs in wheat-exporting regions of Russia at the same time as new medical research extols the immediate health benefits of eating wheat-based products. How would this affect the equilibrium price and quantity?
If demand shifts to the right (increases) and supply shifts to the left (decrease in output due to the drought), equilibrium price will increase but equilibrium quantity will be indeterminate.
Why would a per-unit tax imposed by the government cause the price of jellybeans to rise in the market?
Per-unit taxes raise production costs, lowering supply. If demand falls, firms must lower their prices, not raise them.
What change will a short-run increase in the cost of production cause to the supply and demand curves?
Shift supply curve to the left; demand curve remains unchanged. A change in the cost of production is one of the factors that can shift the supply curve; it does not cause any change in the demand curve.
If demand for Product X decreases when the price of Product Y decreases, then are they supplements or complements?
When the price of Product Y falls, consumers reduce demand for Product X and increase their quantity demanded for Product Y, a substitute.
Assume steak is a normal good and bologna is an inferior good. What effect will a decrease in consumer incomes have on the prices of the products?
When incomes fall, demand for normal goods falls, while demand for inferior goods rises. Prices move with the changes in demand.