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:

From 1970 to 2017, the real price of a college education increased, and total enrollment increased. Which of the following could have caused this increase in price and enrollment?

Figure 2.6.1 -Refer to Figure 2.6.1 above. Which of the following is a proper value for Z in the vertical axis?

Rare earth metals are used to manufacture some important electronic components in popular products like cell phones. These metals are not really rare, but they are expensive to extract from the ground. What happens to the market for the rare earth metals if these extraction costs increase?

Which of the following would cause a shift to the right of the supply curve for gasoline? I. A large increase in the price of public transportation. II) A large decrease in the price of automobiles. III) A large reduction in the costs of producing gasoline.

A supply curve reveals:

The current price charged by a local movie theater is $8 per ticket. The concession stand at the theater averages $5 in revenue for each ticket sold. At the current ticket price, the theater typically sells 300 tickets per showing. If the theater raises ticket prices to $9, the theater will sell 270 tickets. What is the price elasticity of demand at $8? What happens to ticket revenue if the theater increases ticket prices to $9 from $8? What happens to concession revenue if the theater increases ticket prices? If the theater wants to maximize the sum of ticket and concession revenue, should they raise ticket prices to $9?

Rare earth metals are used to manufacture some important electronic components in popular products like cell phones. These metals are not really rare, but they are expensive to extract from the ground. What happens to the market for the rare earth metals if these extraction costs increase?

Figure 2.1.2 -Refer to Figure 2.1.2. If the price of coffee decreases, from $7.50 to $6.00 per pound, which of the following will occur?

As long as the actual market price exceeds the equilibrium market price, there will be:

From 1970 to 2017, the real price of eggs decreased and the total annual consumption of eggs decreased. Which of the following would cause an unambiguous decrease in the real price of eggs and an unambiguous decrease in the quantity of eggs consumed?

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?

A price floor policy establishes a minimum price for a market. Which of the following results from a binding price floor?

Suppose the quantity of nursing services demanded exceeds the quantity of nursing services supplied. The nursing wage rate will:

The inverse demand curve for product X is given by: P_X = 25 - 0.005Q + 0.15P_Y, where P_X represents price in dollars per unit, Q represents rate of sales in pounds per week, and P_Y represents selling price of another product Y in dollars per unit. The inverse supply curve of product X is given by: P_X = 5 + 0.004Q. a. Determine the equilibrium price and sales of X. Let P_Y = $10. b. Determine whether X and Y are substitutes or complements.

American Mining Company is interested in obtaining quick estimates of the supply and demand curves for coal. The firm's research department informs you that the elasticity of supply is approximately 1.7, the elasticity of demand is approximately -0.85, and the current price and quantity are $41 and 1,206, respectively. Price is measured in dollars per ton, quantity the number of tons per week. a. Estimate linear supply and demand curves at the current price and quantity. b. What impact would a 10% increase in demand have on the equilibrium price and quantity? c. If the government refused to let American raise the price when demand increased in (b) above, what shortage is created?

Figure 2.4.2 -Refer to Figure 2.4.2 above. Which of the following best describes de demand curve in this figure?

Example 2.2 in the textbook explains the source of wage inequality in the United States. In terms of supply and demand, the wage of unskilled workers has:

When the government controls the price of a product, causing the market price to be below the free market equilibrium price,

The demand for packs of Pokemon cards is given by the equation At a price of $2.50 per pack, what is the quantity demanded? At $5.00 per pack, what is the price elasticity of demand?