Midterm 1 (Ch.3, Ch.7) supply and demand, GDP, CPI, Inflation

The GDP deflator measures

price levels

Real GDP per capita is NOT an adequate measure of

the well-being of each person in an economy.

The accompanying graph contains individual supply curves for the only two firms in a hypothetical market for stuffed animals. Place the market supply curve at the correct location on the graph. (1) What happens to the market if a third supplier enters the market, holding all else constant? (2)

(1) Market line is 5000 animals for $1 & 9000 animals for $8. This is the total from both firms combined. (2) Market Supplies increases.

Determine whether each description refers to nominal gross domestic product (GDP) or real GDP. A measure of an economy's output using current prices. (1) A measure of an economy's output using constant prices. (2) A measure of output that is adjusted for inflation. (3) A measure of output that is not adjusted for inflation. (4)

(1) nominal GDP (2) real GDP (3) real GDP (4) nominal GDP

The market value of which of the following would be considered double counting in the calculation of GDP? Please sort into the appropriate box.

NOT included in the GDP because of double counting: -wheels used to produce a skateboard that will be sold new -a ticket for X Games bought from a person on the street corner -a used copy of the Tony Hawk video game -a used skateboard you buy for your brother -a previously owned collectors skateboard Included in GDP: -a new skateboard you bought for your niece -the commission paid to the seller of a previously owned collectors skateboards -a new building for Tony Hawk Industries

Classify each scenario according to whether the change in quantity is caused by a shift in the supply curve or movement along the supply curve.

Shift of the supply curve - After discovering that flash-steaming tuna before using mechanical processes to extract meat removes more tuna flesh, more cans of tuna arrive on the shelves at all major grocers. - Amplitude decides to join the smartphone market. Movement along the supply curve -Rising wages for construction workers in Toronto result in construction workers moving to Toronto. - Americans sell their gold and silver jewelry as a result of rising prices. - A national consumer products company produces less of its premium quality soap as a result of lower soap prices.

During the Obama administration, the development of low-cost batteries for electric cars received large amounts of federal funding in terms of subsidies. Meanwhile, American households gave a higher priority towards minimizing their environmental impact. Consider the market for zero-emissions electric vehicles where there is an upward-sloping supply curve and a downward-sloping demand curve. Which direction will demand and supply shift? (1) What will happen to the equilibrium price? (2) What will happen to the equilibrium quantity? (3)

(1)Both curves will shift right. (2)Change is ambiguous. (3)Quantity increases.

Stone and brick are substitutes in home construction. Consider the market for bricks depicted below. Suppose the price of stone increases due to new regulations for the stone quarrying industry. Illustrate the impact this will have on the market for bricks. 1. Equilibrium price 2. Equilibrium quantity

1. Increases 2. Increases Graph - Supply stays the same, Demand increases

The U.S. government has subsidized ethanol production since 1978. With the advent of affordable electric cars, policymakers are considering whether to allow the subsidy to expire. The accompanying graph represents the market for ethanol. Move the supply and/or demand curves to show how reducing the subsidy will affect the ethanol market Equilibrium price (1) Equilibrium Quantity (2)

1. Increases 2. Decreases Graph Demand remains the same and supply decreases by (moving up and left).

Suppose that there has been a sudden influx of refugees in the small town of Dallon, leading to a doubling of the local population. The accompanying graph depicts Dallon's market for food. Adjust the graph to show the immediate impact that this rise in population has on the food market. Then determine what happens to equilibrium price and quantity. 1. Equilibrium price 2. Equilibrium quantity

1. Increases 2. Increases Graph - Supply stays the same, Demand increases

Andrew, a college student, loves drinking coffee late at night to study for exams. Having no income, he is used to buying cheap, bad-tasting coffee, such as Beanlightened, that he needs to grind and brew himself. The coffee tastes putrid but, with enough cream and sugar, Andrew is able to tolerate it. Occasionally, he does go out to Starbucks when he has spare money. After graduation, Andrew gets a job working at a database firm as a programmer. His income is now a healthy $75,000 a year, and he decides he has had enough bad-tasting coffee. He ends up buying coffee daily from Starbucks, even though it costs significantly more than Beanlightened. 1. In economic terms, Starbucks coffee is for Andrew a(n) 2. Beanlightened coffee is for Andrew a(n) 3. Andrew's demand for Starbucks Coffee changed as a result of...

1. Normal Good 2. Inferior Good 3. a change in income.

Suppose the cost of lithium-ion batteries, an input into the production of electric vehicles, has dropped more steeply than expected. The accompanying graph depicts a market for electric vehicles. Demonstrate the effect of a reduction in the price of lithium-ion batteries by adjusting the accompanying diagram. Equilibrium price (1) Equilibrium Quantity (2)

1. decreases 2. increases Graph Demand remains the same and supply increases by (moving down and to the right).

The figure shows the supply and demand for online music. Suppose that an economic downturn decreases household wealth and erodes consumer confidence. Move the supply and/or demand curves to reflect the primary effect this would have on the market for online music. You can assume that online music is a normal good. Also select the end result of equilibrium price and quantity. 1. Equilibrium price 2. Equilibrium quantity

1. decreases. 2.decreases. graph - Supply stays the same, Demand decreases

The demand schedule for chicken feet, a dim sum delicacy served at some Chinese restaurants, is shown in the table. Although some people find the texture strange, others have developed a taste for it. -Price of chicken feet (per pound) -Quantity of chicken feet demanded (millions of pounds) in 2008 -Quantity of chicken feet demanded (millions of pounds) in 2018 $ 3.00 3.0 9.2 $ 2.50 3.2 9.9 $ 1.25 3.6 10.3 $ 1.00 4.1 12.2 $ 0.50 5.7 15.0 How many more chicken feet were demanded in 2018 , at a price of $3.00 a pound, than in 2008 ? Based on the demand schedule, you conclude...

6.2 million pounds (9.2 - 3.0) the demand curve shifted to the right.

The accompanying graph depicts a hypothetical market for analog TVs. In June 2009, the U.S. Federal Communications Commission (FCC) mandated that all over-the-air television broadcasts originating in the U.S. must be broadcast digitally instead of the traditional analog signal. These digital transmissions cannot be decoded by traditional analog TVs but require either a digital decoder be attached to an analog TV or a natively digital TV. Both producers and consumers were made aware of the upcoming switch from analog transmission to digital several years before the mandate took effect. Demonstrate on the graph how the market for analog TVs changed immediately following the announcement of the switch to digital.

Graph Supply increases by moving down and right and demand decreases by moving down and left

The accompanying supply and demand graph represents a hypothetical market for spaghetti pasta. Demonstrate how an increase in the price of penne, a different type of pasta, and a decrease in the price of meatballs will affect the supply and demand of spaghetti pasta. Assume that producers of spaghetti pasta do not also produce penne.

Graphs Supply is same Demand is more

Categorize each scenario as describing a movement along a demand curve or a shift of the demand curve.

Shift of the demand curve -A shift in a demand or supply curve occurs when a good's quantity demanded or supplied changes even though price remains the same. Movement along the demand curve -A movement along the demand curve will occur when the price of the good changes and the quantity demanded changes in accordance to the original demand relationship.

According to the law of demand,

a decrease in price increases quantity demanded.

The demand curve

is a graphical representation of the relationship between price and quantity demanded.

Suppose the accompanying graph depicts a market for one pound bags of candy. Place the line labeled Excess Demand at a price that would generate an excess demand (shortage). Then, determine the size of the excess demand.

line = anything below equilibriumExcess demand = 4 million bags

For each example listed, decide if the good is a normal good or an inferior good. Make sure you answer from the perspective of the individual or individuals doing the buying or consuming. 1.Billy's mom increases his weekly allowance by $5 . As a result, Billy increases the number of apps he downloads on his smartphone. Smartphone apps are 2.Susan gets a 15 percent performance bonus at work. She can finally stop eating so many frozen pizzas and eat something more tasty. Frozen pizzas are 3.Mike is an appliance salesman. Refrigerator sales in his store have fallen and so has his commission. Mike decides to switch from name brand cereal to generic cereal. Generic cereal is 4.Hair stylist Molly loses a few of her clients. Molly cuts back on the number of smoothies she buys during the week. Smoothies are

1. a normal good 2. an inferior good 3. an inferior good 4. a normal good

In the boxes below, please place the items into the bin it belongs to when calculating Gross Domestic Product (GDP). Either Consumption, Investment, Government, or Net Exports (or Trade Balance). If it is not included in GDP, leave it unplaced.

Consumption: -ice cream, -a domestically manufactured personal computer, -cab fare for personal use, -55 cent tacos, -A super bowl ticket bought new from the NFL Investments: -A domestically manufactured business computer Government: -A public school teacher's salary Net Exports: -An exported doll house

Given the following information about the economy of Pakistan, calculate Pakistan\'s GDP. Note that the currency of Pakistan is the Rupee. Assume that the values are all current and no conversions need to be made.

GDP = C+I+G+(X-M) Individual Consumption, C = 9.80 Government spending, G = 3.20 Pakistan Exports, X = 1.26 Pakistani Imports, M = 2.68 Investment, I = 1.20 GDP= 9.80+1.20+3.20+(2.68-1.26)=12.78

The accompanying graph represents a hypothetical market for luxury automobiles. Suppose that a major luxury car producer exits the market in order to produce more economy cars. At the same time, a market research group reports that the average price of a luxury car is increasing and the number of luxury cars sold is increasing. Manipulate the graph to demonstrate what must be happening to supply and demand.

Graph Demand is maxed by moving up and right and Supply increases by moving up and left

Classify the following goods according to whether or not they would be included in calculating the GDP for the United States. All goods should be placed. If a country is not specified, you can assume the action is performed in the United States.

Included in the GDP of the U.S.: -Honda assembly and sale of cars in the U.S. -Old Navy purchases mannequins to display clothes NOT included in the GDP of the U.S.: -Sales of wheat to Mrs. Baird's Bakery -Resale of used textbooks to college students -GM's assembly and sale of cars in Mexico -Ocean Spray purchases plastic to make bottles

The accompanying table contains the individual demand schedules of dark chocolate for Vanessa and Angela. Assuming they are the only people in the market for dark chocolate, place each of their individual demand curves and the market demand curve at the correct locations on the accompanying graph. Price of dark chocolate(per pound) Pounds of dark chocolate demanded by Vanessa Pounds of dark chocolate demanded by Angela $8 1 3 $1 3 5 After a while, Angela gets sick of eating the bitter chocolate and decides to cut back on dark chocolate and enjoy white chocolate more. What happens as a result of Angela's decision? Select all of the correct answers.

Angela's individual demand for white chocolate increases. Angela's individual demand for dark chocolate decreases. The market demand for dark chocolate will decrease.

The accompanying graph represents the supply of printer ink cartridges. The current price of ink (per cartridge) is $20 and indicated by the point on the supply curve. Suppose the price of cartridges increases to $24. Illustrate on the graph how the market for Ink Cartridges changes.

line stays the same, point moves along line to $24