Quiz 3

In the market for guitars, a technological advance which allows for faster production of guitar manufacturing will result in:

A rightward shift in supply and a lower market price

If the market price (where supply intersects demand) is $2 for fancy candy bars, but firms initially set a price of $1.50, which of the following will result?

A shortage: quantity supplied will be less than quantity demanded

Georgette was making $4,000 per month, but her work cut her hours, so she is now making $2,500 per month. What do you expect to happen to Georgette's demand curve for powdered cheese (an inferior good) as a result of this income change?

Demand curve for powdered cheese will shift to the right (increase) because powdered cheese is an inferior good.

Assume the demand for a product decreases and the supply also decreases. What is expected to happen to the equilibrium price (Pe) in the market?

Pe could either increase, decrease or remain the same.

What is the relationship between price and quantity supplied?

Positive because as the price increases, suppliers are both willing and able to incur higher costs to increase the quantity supplied

Market: Hotdogs. If the price of hotdogs decreases, which of the following is true?

The demand curve for hotdogs will not move, but the quantity demanded will increase

The Market: Flat-screen TVs. The Scenario: The price of sound-systems, a good that is often purchased together with flat-screen TVs, goes down. Simultaneously producers of flat-screen TVs expect the price of TVs to go down in the near future. What will happen to the demand and/or the supply for flat-screen TVs as a result of the above scenario?

The demand increases and the supply increases

If a tax is placed on the producers of guitars, what is expected to happen?

The supply curve will be shifted left and the price consumers pay will increase

If the "supply increases" for any given product, how would this be modeled graphically? (Assume the x-axis is labeled "Quantity" and the y-axis is labeled "Price."

The supply curve will shift rightward (downward).

The law of demand states that price and quantity demanded are inversely related. Choose the best interpretation of the law of demand from the options below.

When the price increases, consumers cannot afford as much so they buy less.