ECON 131 CH 4
If a shortage exists in a market, then we know that the actual price is
below the equilibrium price, and quantity demanded is greater than quantity supplied.
In a market economy, supply and demand determine
both the quantity of each good produced and the price at which it is sold.
A decrease in supply is represented by a
leftward shift of a supply curve.
When a surplus exists in a market, sellers
lower price, which increases quantity demanded and decreases quantity supplied, until the surplus is eliminated.
Another term for equilibrium price is
market-clearing price.
A competitive market is a market in which
no individual buyer or seller has any significant impact on the market price.
In a competitive market, each seller has limited control over the price of his product because
other sellers are offering similar products.
Which of the following is not held constant in a demand schedule?
price
Adam Smith suggested that an invisible had guides market economies. In this analogy, what is the baton that the invisible hand uses to conduct the economic orchestra?
prices
There is no shortage of scarce resources in a market economy because
prices adjust to eliminate shortages.
The signals that guide the allocation of resources in a market economy are
prices.
Refer to Figure 4-22. What is the equilibrium quantity in this market?
8 units
When a shortage exists in a market, sellers
raise price, which decreases quantity demanded and increases quantity supplied until the shortage is eliminated.
An increase in demand is represented by a
rightward shift of a demand curve.
The law of supply states that, other things equal, when the price of a good
rises, the quantity supplied of the good rises.
A monopoly is a market with one
seller, and that seller sets the price
Refer to Figure 4-22. At a price of $12, there is a
shortage of 4 units.
Refer to Figure 4-22. At a price of $8, there is a
shortage of 8 units.
In a market economy,
supply and demand determine prices and prices, in turn, allocate the economy's scarce resources.
If the number of sellers in a market increases, then the
supply in that market will increase.
Workers at a bicycle assembly plant currently earn the mandatory minimum wage. If the federal government increases the minimum wage by $1.00 per hour, then it is likely that the
supply of bicycles will shift to the left.
Refer to Figure 4-22. At a price of $20, there is a
surplus of 4 units.
Refer to Figure 4-22. At a price of $24, there is a
surplus of 8 units.
In markets, prices move toward equilibrium because of
the actions of buyers and sellers.
A surplus exists in a market if
the current price is above its equilibrium price.
A shortage exists in a market if
the current price is below its equilibrium price.
Today's demand curve for gasoline could shift in response to a change in
the expected future price of gasoline.
Today's supply curve for gasoline could shift in response to a change in
the expected future price of gasoline.
Which of the following events must result in a higher price in the market for cigars?
Demand for cigars increases, and supply of cigars decreases.
Suppose the incomes of buyers in a market for a particular normal good decrease and there is also a reduction in input prices. What would we expect to occur in this market?
Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.
Suppose that demand for a good increases and, at the same time, supply of the good decreases. What would happen in the market for the good?
Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.
Suppose the number of buyers in a market increases and a technological advancement occurs also. What would we expect to happen in the market?
Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
During the last few decades in the United States, health officials have argued that eating too much beef might be harmful to human health. As a result, there has been a significant decrease in the amount of beef produced. Which of the following best explains the decrease in production?
Individual consumers, concerned about their own health, decreased their demand for beef, which lowered the equilibrium price of beef, making it less attractive to produce.
The law of supply and demand asserts that
the price of a good will eventually rise in response to an excess demand for that good.
Which of the following is not held constant in a supply schedule?
the price of the good
A movement along the supply curve might be caused by a change in
the price of the good or service that is being supplied.
When the price of a good or service changes,
there is a movement along a given demand curve.
The demand for a good or service is determined by
those who buy the good or service
The supply of a good or service is determined by
those who sell the good or service.
The supply curve for portable charcoal grills shifts
when a determinant of the supply of portable charcoal grills other than the price of portable charcoal grills changes.
What would happen to the equilibrium price and quantity of coffee if the wages of coffee-bean pickers fell and the price of tea fell?
Price would fall, and the effect on quantity would be ambiguous.
Which of the following events could shift the demand curve for gasoline to the left?
Public service announcements run on television encourage people to walk or ride bicycles instead of driving cars.
Refer to Figure 4-22. What is the equilibrium price in this market?
$16
Which of the following events would cause a movement upward and to the right along the supply curve for mangos?
The price of mangos rises.
Which of the following changes would not shift the demand curve for a good or service?
a change in the price of the good or service
Which of the following changes would not shift the supply curve for a good or service?
a change in the price of the good or service
Suppose scientists provide evidence that people who drink energy drinks are more likely to have a heart attack than people who do not drink energy drinks. We would expect to see
a decrease in the demand for energy drinks.
Which of the following would most likely serve as an example of a monopoly?
a local electrical company
In a competitive market, the quantity of a product produced and the price of the product are determined by
all buyers and all sellers.
When we move along a given supply curve,
all nonprice determinants of supply are held constant.
Which of the following would shift the demand curve for gasoline to the right?
an increase in consumer income, assuming gasoline is a normal good
If mayonnaise and Miracle Whip are substitutes, then which of the following would increase the demand for Miracle Whip?
an increase in the price of mayonnaise
A movement downward and to the left along a supply curve is called a(n)
decrease in quantity supplied.
An early frost in the vineyards of Napa Valley would cause a(n)
decrease in the supply of wine, increasing price.
A decrease in the price of a good will
decrease quantity supplied.
Two goods are substitutes when a decrease in the price of one good
decreases the demand for the other good.
Which of the following events must cause equilibrium quantity to fall?
demand and supply both decrease
Which of the following events must cause equilibrium price to fall?
demand decreases and supply increases
Opponents of cigarette taxes often argue that tobacco and marijuana are substitutes so that high cigarette prices
encourage marijuana use, but the evidence does not support this argument.
The unique point at which the supply and demand curves intersect is called
equilibrium.
At the equilibrium price, the quantity of the good that buyers are willing and able to buy
exactly equals the quantity that sellers are willing and able to sell.
Recent forest fires in the western states are expected to cause the price of lumber to rise in the next six months. As a result, we can expect the supply of lumber to
fall now.
The law of demand states that, other things equal, when the price of a good
falls, the quantity demanded of the good rises.
If textbooks and study guides are complements, then an increase in the price of textbooks will result in
fewer study guides being sold.
Most markets in the economy are
highly competitive
For a competitive market,
if a seller charges more than the going price, buyers will go elsewhere to make their purchases.
Two goods are complements when a decrease in the price of one good
increases the demand for the other good.