ScienceEconomicsMicroecon Chap4
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Microecon Chap4

Bowen Walker avatar Bowen Walker
14 November 2023
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question
In a perfectly competitive market, all producers sell (identical) goods or services. Additionally, there are (many) buyers and sellers. Because of these two characteristics, both buyers and sellers in perfectly competitive markets are price (takers). True or False: The market for lettuce does exhibit the two primary characteristics that define perfectly competitive markets.
answer
identical many takers true Perfectly competitive markets have two characteristics: 1. The goods and services bought and sold are all exactly the same. 2. There are large numbers of buyers and sellers, such that no single buyer or seller can affect the market price. Taken together, these two characteristics imply that both buyers and sellers are price takers. That is, both must accept the price as determined by the broader market. Taken together, these two characteristics imply that both buyers and sellers are price takers. That is, both must accept the price as determined by the broader market. Perfectly competitive markets are characterized by large numbers of buyers and sellers who cannot influence market prices and buy and sell identical products. Although in reality, most markets do not perfectly adhere to the assumptions of the perfectly competitive markets, some markets are very close to perfect competition. For example, the market for wheat has millions of consumers who buy wheat, as well as thousands of farmers producing and selling wheat. These consumers and producers take the market price as given and make their production and consumption decisions based on this prevailing price.
question
A table showing the relationship between the price of a good and the amount that buyers are willing and able to purchase at various prices The claim that, with other things being equal, the quantity demanded of a good falls when the price of that good rises A graphical object showing the relationship between the price of a good and the amount of the good that buyers are willing and able to purchase at various prices The amount of a good that buyers are willing and able to purchase at a given price Your task is to take this (demand schedule) and construct a graphical representation of the data. In doing so, you determine that as the price of soda rises, the quantity of soda demanded decreases. This confirms the (law of demand)
answer
Demand schedule Law of demand Demand curve Quantity demanded The table your boss provided shows the relationship between the price of soda and the amount of soda that buyers are willing and able to purchase over a range of prices. This is known as a demand schedule. The graphical representation of these data is known as a demand curve. By plotting these data with price along the vertical axis and quantity along the horizontal axis, you see that the demand curve is downward sloping
question
- Consider the market demand for hot dogs. Complete the following table by indicating whether an event will cause a movement along the demand curve for hot dogs or a shift of the demand curve for hot dogs, holding all else constant. 1. An increase in the price of hot dogs 2. A decrease in income of consumers 3. A change in the expectations of consumers about their future income
answer
Movement along Shift Shift
question
1. The amount of a good that sellers are willing and able to supply at a given price 2. A graphical object showing the relationship between the price of a good and the amount that sellers are willing and able to supply at various prices 3. The claim that, other things being equal, the quantity supplied of a good increases when the price of that good rises 4. A table showing the relationship between the price of a good and the amount of it that sellers are willing and able to supply at various prices If Deborah's boss is interested in a graphical presentation of the relationship between the price and quantity of televisions supplied, you would advise your coworker to construct (a supply curve) using the data provided. However, if Deborah's boss is more interested in the detailed numbers used to construct this visual representation, you would instead advise your coworker that a (supply schedule)would be more appropriate.
answer
Quantity Supplied Supply Curve Law of Supply Supply Schedule
question
1. A decrease in the price of donuts 2. A change in expectations about the future price of donuts 3. A decrease in the number of producers
answer
Movement Along Shift Shift
question
Suppose the market for hamburgers is unregulated. That is, hamburger prices are free to adjust based on the forces of supply and demand. If a shortage exists in the hamburger market, then the current price (must be lower)than the equilibrium price. For the market to reach equilibrium, you would expect (buyers to offer higher prices) .
answer
Prices below the equilibrium price generate excess demand because buyers are willing to purchase more hamburgers than sellers are willing to sell—the quantity supplied is less than the quantity demanded at that price. Some buyers who wish to purchase hamburgers at the current price will be unable to do so. In order to purchase hamburgers, some buyers will offer higher prices. As buyers bid and drive prices upward, some sellers will be willing to sell additional hamburgers. Therefore, the market will move toward the equilibrium price, where the quantity of hamburgers demanded by buyers equals the quantity supplied by sellers.