Exam 2: The Basics of Supply and Demand

The discussion of Figure 2.2 in the text indicates that quantity demanded for most goods tends to increase as income rises. However, the quantity of bananas demanded in the U.S. tends to decrease as income rises. Under this condition, we expect that an increase in consumer income shifts the demand curve for bananas:

Assume that the current market price is below the market clearing level. We would expect:

Which of the following represents the price elasticity of demand?

If two goods are substitutes, the cross-price elasticity of demand must be

Suppose the equilibrium price of milk is $3 per gallon but the federal government sets the market price at $4 per gallon. The market mechanism will force the milk price back down to $3 per gallon unless the government:

The cross-price elasticity between a pair of complementary goods will be

Scenario 2.1: The demand for books is: Q_d = 120 - P The supply of books is: Q_s = 5P -Refer to Scenario 2.1. If P = $25, which of the following is true?

An important determinant of the amount of grains harvested next year by Ethiopian farmers is the amount of seeds planted this year. Given that Western nations have guaranteed to donate five hundred tons of grain next year, this year the Ethiopian farmers will:

Plastic and steel are substitutes in the production of body panels for certain automobiles. If the price of plastic increases, with other things remaining the same, we would expect:

By 2020, automobile market analysts expect that the demand for electric autos will increase as buyers become more familiar with the technology. However, the costs of producing electric autos may increase because of higher costs for inputs (e.g., rare earth elements), or they may decrease as the manufacturers learn better assembly methods (i.e., learning by doing). What is the expected impact of these changes on the equilibrium price and quantity for electric autos?

The cross-price elasticity of demand for peanut butter with respect to the price of jelly is -0.3. If we expect the price of jelly to decline by 15%, what is the expected change in the quantity demanded for peanut butter?

Which of the following will cause the demand curve for Beatles' compact discs to shift to the right?

Which of these measures the responsiveness of the quantity of one good demanded to an increase in the price of another good?

A freeze in Florida's orange growing regions will:

Due to capacity constraints, the price elasticity of supply for most products is:

In recent years, the world demand curve for copper shifted rightward due to continued economic growth in China and other emerging economies. Also, the costs of extracting the copper increased due to higher energy prices. As a result, we observed:

Scenario 2.1: The demand for books is: Q_d = 120 - P The supply of books is: Q_s = 5P -Refer to Scenario 2.1. If P = $15, which of the following is true?

For computers and other business equipment, small changes in business earnings tend to generate relatively large short-run changes in the demand for this equipment. In the long run, the responsiveness of demand for business equipment with respect to income changes tends to be:

Suppose biochemists discover an enzyme that can double the amount of ethanol that may be derived from a given amount of biomass. Based on this technological development, we expect the:

Which of the following will NOT cause a rightward shift in the demand curve for beer?