Chapter 4. Supply and Demand
The given graph shows the supply of a good decreasing from S0 to S1. The equilibrium price of the good increased from:
P3 to P2.
An increase in supply is represented by a movement from
S0 to S1.
In which of the following markets will the fallacy of composition be most important to consider?
The U.S. labor market
In the graph, which of the following represents excess supply?
The quantity supplied at A minus the quantity demanded at B
True or false: The fallacy of composition is important to remember when doing macroeconomic analysis.
True
True or false: The fallacy of composition warns us that what is true for a part is not necessarily true for the whole.
True
True or false: The supply/demand model is not a good model to apply to macroeconomics.
True
Graphically, quantity demanded refers to
a point on the demand curve.
Quantity supplied along a supply curve tells us how much will be bought at
a specific price.
The shift of the supply curve shown in the figure could be due to
a subsidy on the production of the good.
The shift of the supply curve shown could be due to
an increase in the price of inputs
The law of demand is based on the observation that if the price of a good rises,
consumers will substitute a relatively cheaper good.
The law of supply states that the quantity supplied of a good is
directly related to the good's price.
The demand curve is generally
downward sloping because as price rises, quantity demanded tends to fall.
To calculate market supply add
quantities supplied at every price
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 candy falls, the
quantity of candy demanded will rise.
If the price of shoes rises, the
quantity of shoes demanded will fall.
Excess supply is the amount by which
quantity supplied exceeds quantity demanded
According to the law of supply, when the price of shoes rises the
quantity supplied will rise.
In the real world, we would expect that quantity
supplied and quantity demanded might, but often won't, be equal.
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 supply is based on the fact that a firm can readjust its activities to supply
-more of a good if its price rises. -less of a good if its price falls.
Demand for a good could change if the
-price of another good changes. -income of the consumers changes.
The law of supply states that quantity supplied
-rises as price rises. -falls as price falls.
Supply shifts with a change in:
-the price of inputs for the good. -production technology. -expectations of sellers.
Suppose a market has an excess supply and price starts to fall. What is likely to happen to quantity demanded and supplied?
A fall in quantity supplied and a rise in quantity demanded.
At a price of $24, there is an excess
supply of 4 units.
Graphically, demand refers to
the entire demand curve.
When supply increases
the entire supply curve shifts to the right.
The shift of the demand curve from D0 to D1 in the given figure could be due to
the imposition of a tax on the good.
A typical supply curve is
upward sloping
Supply tells us how much will be bought at
various prices.
The fallacy of composition is the false assumption that
what is true for a part will also be true for the whole.
True or false: The false assumption that what is true for the whole will also be true for the part is called the fallacy of composition.
False
When we consider the labor market for the entire United States, we can assume that changes in demand and supply are independent of one-another.
False
In which situation is the price expected to rise?
Quantity demanded exceeds quantity supplied.
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.
Which of the following does not result in a shift of your supply curve for labor?
The wage that you earn doubles.
The movement from A to B represents
a decrease in quantity demanded.
The movement in this graph from point A to B shows
a decrease in quantity supplied.
Quantity demanded is how much will be bought at
a specific price.
The shift of the supply curve shown in the figure could be due to
a tax levied on the producer of the good.
The shift of the demand curve from D0 to D1 could be due to
an increase in the price of a complementary good.
Price Quantity Demanded Quantity Supplied $3.00 20 14 $4.00 15 15 $5.00 10 16 At a price of $5, there is:
excess quantity supplied of 6 units.
The false assumption that what is true for a part will also be true for the whole is called the
fallacy of composition.
A market demand curve is the
horizontal sum of all individual demand curves.
A market supply curve is the
horizontal sum of individual supply curves
The law of supply is based on the fact that a firm will want to supply
more of a good when its price rises because the opportunity cost of not supplying the good has risen.
A movement along a demand curve can be caused by a change in the
price of the good.
When there is excess demand for a good, prices tend to
rise.
A change in a factor other than price that affects demand leads to a
shift in demand.
At a price of $10, the quantity supplied is
20 units.
At a price of $6, the quantity demanded will be
20 units.
For the given graph, the equilibrium price is _____ and the equilibrium quantity is _____.
$18; 6 units
Price Quantity Demanded Quantity Supplied $3.00 20 14 $4.00 15 15 $5.00 10 16 In the table above, there is excess demand at price:
$3
For the given graph, the equilibrium price is ____ and the equilibrium quantity is ____.
$8; 15 units
In the graph, the demand curve is represented by
A.
An increase in quantity demanded is represented by a movement from
B to A.
An increase in demand is represented by a movement from
C to D.
In the graph, which of the following represents excess demand?
E minus D
True or false: A change in the price of a good causes a shift in the demand curve.
False
True or false: Excess demand is the amount by which quantity supplied exceeds quantity demanded.
False
True or false: In the real world, we would expect that quantity supplied would generally equal quantity demanded.
False
The given graph shows the demand for a good increasing from D0 to D1. The new equilibrium price of the good is:
P2.
The given graph shows the supply of a good decreasing from S0 to S1. The new equilibrium quantity of the good is:
Q1.
The given graph shows the demand for a good increasing from D0 to D1. The new equilibrium quantity of the good is:
Q3.
True or false: Equilibrium is not preferred to disequilibrium.
True
True or false: Equilibrium is the concept in which opposing dynamic forces cancel each other out.
True
True or false: Excess supply is the amount by which quantity supplied exceeds quantity demanded.
True
The movement from D to C represents
a decrease in demand.
To create a market demand curve,
add quantities demanded of all individuals in the market at every price.
At a price of $10, there is
an excess supply of 10 units.
A change in quantity supplied from A to B would be caused by
an increase in supply.
At a price of $6, there is an excess
demand of 10 units.
At a price of $12, there is an excess
demand of 4 units.
When there is excess supply for a good, prices tend to
fall.
The law of demand is based on the concept of
substitution
According to the law of supply, when the price of candy rises
the quantity supplied will rise.
Which phenomena underlie the law of demand for the market?
-At lower prices, existing demanders buy more. -At lower prices, new demanders enter the market.
A change in which of the following can shift the demand curve for a good?
-Expectations of the consumers about the future price of the good -Taxes paid by and subsidies paid to the consumers -Tastes and preferences of the consumers
The law of demand states that the quantity demanded
-falls as price rises. -rises as price falls.