HW 2

What would happen to the equilibrium price and quantity of lattés if consumers' incomes rise and lattés are a normal good?

Both the equilibrium price and quantity would increase.

What would happen to the equilibrium price and quantity of peanut butter if the price of peanuts went up, the price of jelly fell, fewer firms decided to produce peanut butter, and health officials announced that eating peanut butter was good for you?

Price will rise, and the effect on quantity is ambiguous.

What will happen to the equilibrium price and quantity of new cars if the price of gasoline rises, the price of steel rises, public transportation becomes cheaper and more comfortable, and auto-workers negotiate higher wages?

Quantity will fall, and the effect on price is ambiguous.

What happens to the equilibrium price and quantity of automobile tires if rubber prices increase and the price of automobiles falls?

The equilibrium price rises, but the change in equilibrium quantity is unknown

Which of the following increases the supply of gasoline?

a decrease in the price of a resource used to produce gasoline, such as crude oil

A student at New York University used to take the Redhound bus when she visited her grandmother in Boston. After graduating, although the bus fare and the plane fare were the same as they were when she was a student, with a well-paid job on Wall Street she now takes the plane to Boston to visit her grandmother. For this student, travel by Redhound bus is

an inferior good.

Advances in productivity increase supply because they might

decrease the cost of production.

Suppose the price of leather used to produce shoes increases. The higher price of leather ________ the supply of shoes, and the supply curve of shoes ________.

decreases; shifts leftward

Demand curves slope ________ because as the price increases and other things remain the same, the quantity demanded _____

downward; decreases

Millions of people from Mexico have migrated to the United States. This has reduced the supply of labor in Mexico and increased the supply of labor in the United States. Assume that the demand for labor in Mexico and the United States is unchanged. Then wages in the United States ________ and wages in Mexico ________.

fall; rise

Assume a market is in equilibrium. There is an increase in supply, but no change in demand As a result the equilibrium price ________, and the equilibrium quantity ________.

falls; increases

During 2008 the supply of gasoline decreased while at the same time the demand for gasoline increased. If the magnitude of the increase in demand was greater than the magnitude of the decrease in supply, then the equilibrium price of gasoline ________ and the equilibrium quantity ________.

increased; increased

"Other things remaining the same, if the price of a good rises, the quantity supplied of that good increases." This sentence describes a

movement along a supply curve.

Suppose that tattoos gained immense popularity with retired people as well as college students. This gain in popularity best reflects which of the following influences on buying plans?

preferences

When there is a shortage of parking spaces at your college, the

quantity of parking spaces demanded is greater than the quantity of parking spaces supplied

If the demand for used cars decreases after the price of a new car falls, used cars and new cars are

substitute goods.

To find the market demand curve for in-line skates, we must

sum horizontally the individual demand curves of all the buyers.

Hot dogs and hot dog buns are complements. If the price of a hot dog falls, then

the demand for hot dog buns will increase.

Market equilibrium occurs when

the quantity demanded equals the quantity supplied.