Suppose that in 2007, Ford sold 500,000 Mustangs at an average price of $18,800 per car; in 2008, 600,000 Mustangs were sold at an average price of $19,500 per car. These statements:
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suggest that the demand for Mustangs increased between 2007 and 2008.
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Which of the following would most likely increase the demand for gasoline?
A. The expectation by consumers that gasoline prices will be higher in the future.
B. The expectation by consumers that gasoline prices will be lower in the future.
C. A widespread shift in car ownership from SUVs to hybrid sedans.
D. A decrease in the price of public transportation.
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A.
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With a downsloping demand curve and an upsloping supply curve for a product, a decrease in resource prices will:
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decrease equilibrium price and increase equilibrium quantity.
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Because of unseasonably cold weather, the supply of oranges has substantially decreased. This statement indicates the:
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amount of oranges that will be available at various prices has declined
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If the demand curve for product B shifts to the right as the price of product A declines, then:
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A and B are complementary goods.
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If X is a normal good, a rise in money income will shift the:
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demand curve for X to the right.
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An improvement in production technology will:
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shift the supply curve to the right.
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Camille's Creations and Julia's Jewels both sell beads in a competitive market. If at the market price of $5 both are running out of beads to sell (they can't keep up with the quantity demanded at that price), then we would expect both Camille's and Julia's to:
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raise their price and increase their quantity supplied.
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An effective price floor on wheat will:
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result in a surplus of wheat.
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ver time, the equilibrium price of a gigabyte of computer memory has fallen while the equilibrium quantity purchased has increased. Based on this we can conclude that:
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increases in the supply of computer memory have exceeded increases in demand.
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T/F: If supply increases and demand decreases, equilibrium price will fall.
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true
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A market-based system of buying and selling human organs for transplant would:
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increase the quantity of organs available for transplant.
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If we say that a price is too high to clear the market, we mean that:
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quantity supplied exceeds quantity demanded.
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Assume the demand curve for product X shifts to the right. This might be caused by:
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a decline in income if X is an inferior good.
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T/F: A market that is achieving allocative efficiency must also be achieving productive efficiency
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true
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Economists use the term "demand" to refer to:
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a schedule of various combinations of market prices and amounts/quantities demanded.
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Supply decreases and demand is constant:
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Price: Increases
Quantity: Decreases
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Demand decreases and supply is constant.
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Price: Decreases
Quantity: Decreases
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Supply increases and demand is constant.
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Price: Decreases
Quantity: Increases
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Demand increases and supply increases.
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Price: Indeterminate
Quantity: Increases
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Demand increases and supply is constant.
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Price: Increases
Quantity: Increases
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Supply increases and demand decreases.
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Price: Decreases
Quantity: Indeterminate
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Demand increases and supply decreases.
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Price: Increases
Quantity: Indeterminate
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Demand decreases and supply decreases.
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Price: Indeterminate
Quantity: Decreases
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What are the determinants of supply?
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technology
resource prices
number of sellers in market
taxes and subsidies
producer expectations
- change in any one of these (supply shifters) will move supply curve
- shift right = increase supply and vic versa
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What are the determinants of demand?
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income
price of related goods
tastes and preferences
number of consumers
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movement or shift along supply curve: change in market price
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movement along curve
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movement or shift along supply curve: change in factor productivity
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shift
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movement or shift along supply curve: change in producer expectations
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shift
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movement or shift along supply curve: change in price of other goods
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shift
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movement or shift along supply curve: change in technology
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shift
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movement or shift along supply curve: change in resource prices
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shift
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movement or shift along supply curve: change in taxes
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shift
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characteristics of upward sloping curve
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increasing opp costs and marginal costs
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How do you derive a market supply curve from individual supply curves?
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Add up quantities supplied by all individual producers for each price
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characteristics of downward sloping demand curve
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increase in purchasing power as market price decreases
diminishing marginal utility
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How is a market demand curve derived from individual demand curves?
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Add up quantities demanded by all individual consumers for each price
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For each stock in the stock market, the number of shares sold daily equals the number of shares purchased. That is, the quantity of each firm's shares demanded equals the quantity supplied. So, if this equality always occurs, why do the prices of stock shares ever change?
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Prices change in reaction to a mismatch between Qd and Qs.
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In which of these two statements are the terms "supply" and "demand" used correctly?
A. "In the corn market, demand often exceeds supply and supply sometimes exceeds demand."
B. "The price of corn rises and falls in response to changes in supply and demand."
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B
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T/F: A price ceiling will result in a shortage only if the ceiling price is less the equilibrium price.
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true
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demand schedule
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A table of numbers showing the amounts of a good or service buyers are willing and able to purchase at various prices over a specified period of time.
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law of demand
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Other things equal, as price falls, the quantity demanded rises, and as price rises, the quantity demanded falls. In short, there is a negative or inverse relationship between price and quantity demanded
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diminishing marginal utility
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in any specific time period, consumer will receive less and less satisfaction with each subsequent purchase/consumption of a product
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income effect
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a lower price increases the purchasing power of a buyer's money income, enabling the buyer to purchase more of the product than before
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substitution effect
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at a lower price buyers have the incentive to substitute what is now a less expensive product for other products that are now relatively more expensive. The product whose price has fallen is now "a better deal" relative to the other products
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demand curve
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downward sloping - reflects law of demand, people buy more of a product as price falls
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changes in demand
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A change in one or more of the determinants of demand will change the demand data;
demand curve shifts right = increase in demand
shifts left=decrease in demand
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normal goods
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Products whose demand varies directly with money income (aka superior goods); buy more or less as income rises or falls
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inferior goods
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Goods whose demand varies inversely with money income
eg As incomes increase beyond some point, the demand for used clothing, retread tires, and third-hand automobiles may decrease because the higher incomes enable consumers to buy new versions of those products
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substitute good
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one that can be used in place of another good
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complementary good
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one that is used together with another good
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change in quantity demanded
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movement from one point to another-from one price-quantity combo to another on fixed demand curve
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supply
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schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each of a series of possible prices during a specific period
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supply schedule
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A table of numbers showing the amounts of a good or service producers are willing and able to make available for sale at each of a series of possible prices during a specified period of time.
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law of supply
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As price rises, the quantity supplied rises; as price falls, the quantity supplied falls
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change of quantity supplied
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movement from one point to another on a fixed supply curve. The cause of such a movement is a change in the price of the specific product being considered.
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equilibrium price
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(market clearing price) the price where the intentions of buyers and sellers match. It is the price where quantity demanded equals quantity supplied
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equilibrium quantity
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quantity at which the intentions of buyers and sellers match, so that the quantity demanded and the quantity supplied are equal.
