chapter 4 homework
c. If the current market price is $4, total market quantity demanded is ____ comic books. If price rises to $8, total market quantity demanded is ____ comic books.
56 , 36
Mary has just stated that normally, as price rises, supply will increase. Her teacher grimaces. Why?
As price rises, quantity supplied will increase.
b. Why is price directly related to quantity supplied?
As price rises, suppliers rearrange their activities to supply more of that good in order to take advantage of the higher price.
b. Why is price inversely related to quantity demanded?
Because as price rises, consumers substitute other goods whose price has not risen.
Identify four shift factors of demand with the correct explanation of how each affects demand.
Change in taxes paid by consumers. As taxes rise, demand falls., Change in consumer tastes. As the taste for a product rises, demand increases., Change in income. As income rises, demand for a normal good increases., The price of a related consumer good changes. As the price of a complement falls, demand increases.,
State whether "other things constant" is likely to hold in the following supply/demand analysis.The impact of a significant decrease in labor costs used to produce manufactured goods on the price of manufactured goods.
No
a. Calculate market demand and market supply.
P D1 D2 D3 DMarket $30 20 5 10 35 40 15 3 7 25 50 10 0 5 15 60 5 0 0 5 P S1 S2 S3 SMarket $30 0 4 11 15 40 0 8 17 25 50 10 12 18 40 60 10 15 20 45
You're given the following individual demand tables for comic books.a. Calculate market demand.
Price John Liz Alex DMarket $16 0 8 0 8 14 0 12 0 12 12 0 16 4 20 10 0 20 8 28 8 0 24 12 36 6 0 28 16 44 4 4 32 20 56 2 4 36 24 64
Identify four shift factors of supply with the correct explanation of how each affects supply.
Producers expect prices of their products to change in the future. As the price that producers expect to sell their products for increases, supply decreases. The price of inputs changes. As the price of inputs rises, supply decreases. When new production technologies are introduced the cost of production falls and supply increases. Change in taxes paid by producers. As the amount of taxes that producers pay increases, supply decreases.
a. State the law of demand.
Quantity demanded rises as price falls, other things constant. Quantity demanded falls as price rises, other things constant.
a. State the law of supply.
Quantity supplied rises as price increases, other things constant. Quantity supplied falls as price decreases, other things constant.
a. OPEC announces it will increase oil production by 20 percent. What is the effect of this action on the price of oil now? ______ will ______, causing the price of oil to ______. b. Demonstrate your answer graphically.
Supply , increase , fall supply curve moves out to right
In the United States, say gasoline costs consumers about $2.50 per gallon. In Italy, say it costs consumers about $6 per gallon. What effect does this price differential likely have on the size of cars in the United States compared to Italy?
The cars in Italy are most likely much smaller than in the United States.
In the United States, say gasoline costs consumers about $2.50 per gallon. In Italy, say it costs consumers about $6 per gallon. What effect does this price differential likely have on:a. The size of cars in the United States compared to Italy? b. The use of public transportation in the United States compared to Italy? c. The fuel efficiency of cars in the United States compared to Italy? d. What would be the effect of raising the price of gasoline in the United States to $5 per gallon? It will likely _____ the size of cars driven in the United States, ______ U.S. use of public transportation, and ______ the fuel efficiency of cars purchased in the United States.
The cars in Italy are most likely much smaller than in the United States. Italians likely use public transportation more than Americans use it. The cars in Italy are most likely more fuel efficient than in the United States. decrease , increase ,increase
In which of the following three markets are there likely to be the greatest feedback effects: market for housing, market for wheat, market for manufactured goods?
The housing and manufactured-goods markets because the greatest feedback effects are likely to occur in the markets that are the largest.
Explain what a sudden popularity of "Economics Professor" brand casual wear would likely do to prices of that brand.
The increase in demand would lead to excess demand, which will lead to higher prices. The net result is a higher equilibrium price and quantity.
In most developing countries, there are long lines of taxis at airports, and these taxis often wait two or three hours for a customer.a. What does this tell you about the price in that market? b. Demonstrate with supply and demand analysis.
The price must be greater than the equilibrium price, causing excess supply. supply and demand curves meet at Pe, excess at P2
In a flood, usable water supplies ironically tend to decline because the pumps and water lines are damaged. What will a flood likely do to prices of bottled water?
The price of bottled water will increase because bottled water is a substitute for water from pumps and water lines. Demand for bottled water would increase enormously, which leads to upward pressure on prices.
a. The price of airline tickets rises during the summer months because demand for airline travel increases as more people take vacations. How will this affect the supply and demand curve for airline tickets? b. Demonstrate your answer to part a. graphically.
This change in consumer tastes causes a shift of the demand curve to the right. The equilibrium price increases as does the equilibrium quantity. demand curve moves out
You're a commodity trader and you've just heard a report that the winter wheat harvest will be 2 billion bushels, a 40 percent jump, rather than an expected 30 percent jump.a. What would you expect would happen to wheat prices? b. Demonstrate your answer to part a graphically.
Wheat prices would decline since the supply of wheat is greater than expected. supply curve moves out to right
State whether "other things constant" is likely to hold in the following supply/demand analyses. a. The impact of an increase in the demand for pencils on the price of pencils. b. The impact of an increase in the supply of labor on the quantity of labor demanded. c. The impact of an increase in aggregate savings on aggregate expenditures. d. The impact of a new method of producing CDs on the price of CDs.
Yes No No Yes
Derive the market supply curve from the following two individual supply curves.
add together each supply to get market supply
b. A medical report implying tea is bad for your health is published. _____ will ______, causing a _______ in price and a _____ in quantity.
demand curve moves in to left Demand , decrease , fall ,fall
a. Using supply and demand curves, demonstrate the report's likely effect on the equilibrium price and quantity of steak sold in the market for steak.
demand curve moves inward
d. Consumers' income falls. (Assume tea is a normal good.) ______will ______, causing a _____ in price and a ____ in quantity.
demand curve shifts in to left demand, decrease, fall, fall
At a price of $30, ___________ is ____. At a price of $60, __________ is _____.
excess demand, 20 excess supply, 40
b. In the market for soda, equilibrium price will _____ and equilibrium quantity will _____.
fall , fall
b. In the market for steak, equilibrium price will ____ and equilibrium quantity will _____.
fall, fall
b. The impact of increased security measures on airline fares ____________ . The impact of increased security measures on the volume of travel _________ .
is uncertain will lead to a decrease in quantity
A change in the price of a good causes a ____________ the demand curve. A __________ the demand curve means that the quantities will be different at all prices.
movement along, shift of
d. Say that an advertising campaign increases demand by 50 percent. Individual and market demand curves will ____ __________ .
shift , to the right
a. What is the expected impact of increased security measures imposed by the federal government on airlines and consumers? What do you predict will happen to airline fares and volume of travel?
supply and demand curves both move in to the left
Assume that Argentina imposes a 20 percent tax on natural gas exports.a. Demonstrate the likely effect of that tax on gas exports using supply and demand curves.
supply curve moves in to left
The following graphs illustrate the market for tea. Based on each of the following occurrences, show on the graph how the supply or demand curve will shift and then answer the question related to the effect on equilibrium price and quantity.a. Bad weather wreaks havoc with the tea crop. ______will ______, causing a _____in price and a _____ in quantity.
supply curve moves in to left Supply , decrease , rise , fall
Assume that Argentina imposes a 20 percent tax on natural gas exports.a. Demonstrate the likely effect of that tax on gas exports using supply and demand curves. b. What does it likely do to the price of natural gas in Argentina?
supply curve moves in to left The tax will likely reduce the price of natural gas in Argentina as more gas is diverted to the domestic market.
Assuming the retailer pays the sales tax, why does sales volume rise during weeks when states suspend taxes on sales by retailers?The reduction in taxes will cause the price to demanders to fall and hence equilibrium quantity demanded will rise .Demonstrate your answer graphically assuming that the retailer pays the tax.
supply curve moves right Sales volume increases (equilibrium quantity rises) when the government suspends the tax on sales by retailers because the price to demanders falls and hence equilibrium quantity demanded rises. This occurs because the supply curve shifts to the right because suppliers do not have to pay taxes on their sales (cost of production declines).
c. A technological innovation lowers the cost of producing tea. _____ will ______, causing a _____ in price and a ______ in quantity.
supply curve shifts out to right Supply , increase , fall , rise
To combat obesity the federal government implemented a 100 percent tax on soda.a. Using supply and demand curves, demonstrate the likely effect of this tax on the equilibrium price and quantity of soda sold in the market.
the demand curve moves inward
a. Define the fallacy of composition.The fallacy of composition is the false assumption that b. How does it affect the supply/demand model?
what is true for a part will also be true for the whole. It draws our attention to the possibility that supply and demand are interdependent and that feedback effects must be taken into account to make the analysis complete.
