ECON CHAPTER 3
What do economists mean when they use the Latin expression ceteris paribus?
All else equal.
From the list below, select the variable that will cause the demand curve to shift:
Consumer income
As an economist, how can you hope that your analysis of the demand for butter is accurate if you neglect thousands and thousands of other variables?
In the model of demand and supply, we focus only on the variables that experience has shown are the most important in determining the demand for a product: income, price of substitutes and complements, taste for the good, population, and the expected future price.
From the list below, select the variable that will cause the supply curve to shift:
The cost of raw materials
Which one is best suited to find the quantity demanded at a price of $4.00?
The demand schedule
The demand for grapes is highest during summer and lowest during winter. Yet grape prices are normally lower in summer than in winter. What must be happening to the supply of grapes, from winter to summer, for the equilibrium price to fall?
The supply increases more than the demand increases.
According to the law of demand there is an inverse relationship between price and quantity demanded. That is, the demand curve for goods and services slopes downward. Why?
When the price of a good increases, consumers' purchasing power decreases, and they cannot buy as much of the good as they did prior to the price change. Your answer is correct.
According to the law of demand there is an inverse relationship between price and quantity demanded. That is, the demand curve for goods and services slopes downward. Why?
When the price of a good increases, consumers' purchasing power falls, and they cannot buy as much of the good as they did prior to the price change.
orange soda considered to be a normal good. Definition: a normal good Show how an increase in consumer income affects the demand for orange soda. A change in consumer income will result in______________________
a shift in the demand curve
In general, the term "ceteris paribus"means
all else equal.
On the diagram to the right, a movement from A to B represents a
change in quantity supplied
As a result of these events, the new equilibrium price of orange juice
could increase, decrease, or remain unchanged.
Given the scenario described in the article, the price of orange juice could increase if
demand decreased less than the supply decreased.
Suppose the price of a complement to LCD televisions rises. What effect will this have on the market equilibrium for LCD TVs? The equilibrium price of LCD TVs will
describe and the equilibrium quantity will decrease
Consider the market for college textbooks. Suppose a recent economic recession has resulted in increased tastes for learning. Increased tastes for learning will shift
he demand curve for textbooks to the right.
According to a news article: About 1.4 billion pounds of American, cheddar and other kinds of cheese is socked away at cold-storage warehouses across the country, the biggest stockpile since federal record-keeping began a century ago...Many [cheese companies] are paying to store their excess cheese in hopes demand and prices will improve. Source: Heather Haddon, "America Can't Move Its Cheese," Wall Street Journal, December 17, 2018. What effect did the strategy of warehousing cheese have on the supply of cheese?
he supply of cheese decreased, shifting the supply curve for cheese to the left.
Suppose supply shifts to the left. With this shift, equilibrium price will__________and equilibrium quantity will___________
increase, decrease
In particular, the equilibrium price will____________and the equilibrium quantity will
increase,increase
Suppose supply shifts to the left. Furthermore, the new supply curve should___________ the original supply curve.
not intersect
n particular, if consumer income increases,then the demand for orange soda will shift to the__________
right
What is the law of demand? The law of demand is the
rule that, holding everything else constant, when the price of a good falls, the quantity demanded will increase, and when the price of a good rises, the quantity demanded will decrease.
The effect of an increase in demand is a___________the demand curve
shift of
The distinction between substitutes and complements is
substitute goods are used for the same purposes while complementary goods are used together.
The late Nobel Laureate Gary Becker once described how an economist should analyze the demand for butter: An economist "would want to consider the price of butter and probably the level of income, the price of margarine, and the size of the population as well. But [the economist] would neglect thousands and thousands of other variables...." Source: Gary Becker, Economic Theory, New Brunswick, NJ: Aldine Transaction, 2007, p. 5. a. What approach to analyzing demand curves is Becker describing?
the ceteris paribus condition
Consider the market for college textbooks. Suppose a recent economic recession has resulted in increased tastes for learning. Increased tastes for learning will shift
the demand curve for textbooks to the right.
The new equilibrium will be where
the new demand curve intersects the supply curve
The new equilibrium will be where
the new demand curve intersects the supply curve.
The law of demand is the assertion that
the substitution effect is the decrease in quantity demanded because the product is more expensive relative to other goods and the income effect is the decrease in quantity demanded owing to the decline in consumers' purchasing power.
According to the law of demand,
there is an inverse relationship between price and quantity demanded.
Suppose supply shifts to the left. The new supply curve should be__________
upward sloping
The distinction between a normal and an inferior good is
when income increases, demand for a normal good increases while demand for an inferior good falls
According to an article in the Wall Street Journal, the demand for orange juice is declining in the United States "as newer entrants in the beverage aisle, including more-exotic fruit juices, such as pomegranate, energy drinks and ready-to-drink coffee, have grabbed a greater share of themarket." At the same time, orange juice production has been declining as bacterial infections reduce the quantity of fruit that orange trees can produce. The article notes that despite the decline in the demand for orange juice, the price of orange juice might increase. Source: Alexandra Wexler, "U.S. Orange-Juice Sales Fall to Record Low," Wall Street Journal, August 18, 2014. As a result of these events, the new equilibrium quantity of orange juice
will decrease.
A column by Greg David in Crain's New York Business discussed the effect of rising costs on prices charged by New York City restaurants. David argued that higher costs would result in higher prices and, "at some point, higher prices should reduce demand." Source: Greg David, "New York Area Restaurants Are Hiking Prices," crainsnewyork.com, May 2, 2018. Is he correct that if the price of a product increases, the demand for the product is reduced?
No: an increase in the price of a product will cause a decrease in the quantity demanded of that product, not a decrease in demand. Your answer is correct.
