Exam 3: The Market Forces of Supply and Demand

a) Given the table below, graph the demand and supply curves for flashlights. Make certain to label the equilibrium price and equilibrium quantity. Price Quantity Demanded Per Month Quantity Supplied Per Month 5 6,000 10,000 4 8,000 8,000 3 10,000 6,000 2 12,000 4,000 1 14,000 2,000 b) What is the equilibrium price and the equilibrium quantity? c) Suppose the price is currently €5. What problem would exist in the market? What would you expect to happen to price? Show this on your graph. d) Suppose the price is currently €2. What problem would exist in the market? What would you expect to happen to price? Show this on your graph.

Explain the difference between these two statements. a. A rise in price leads to a decrease in quantity demanded. b. A rise in price is caused by an increase in demand.

When the price of a good is below the equilibrium price, it causes a surplus.

In a market economy, supply and demand determine

If Coke and Pepsi are substitutes, an increase in the price of Coke will cause an increase in the equilibrium price and quantity bought and sold in the market for Pepsi.

Explain why the relationship between price and quantity demanded is known as the 'law of demand'.

A perfectly competitive market has

If the price of a good is equal to the equilibrium price,

If a drought destroyed half of the French garlic crop at a time when the health benefits of garlic were being well publicized, economists would expect that in the market for garlic

Which of the following are most likely to be an inferior good?

Suppose that a large dairy farmer is able to raise the market price of milk by withholding milk supply from the market. In this instance,

What determines the degree of competitiveness in a market?

Fill in the table below, showing whether equilibrium price and equilibrium quantity go up, go down, stay the same, or change ambiguously. No Change in Supply An Increase in Supply A Decrease in Supply No Change in Demand An Increase in Demand A Decrease in Demand

An increase in the number of tomato producers will

Which of the following shifts the demand for watches to the right?

Suppose a frost destroys much of the Florida orange crop. At the same time, suppose consumer tastes shift toward orange juice. What would we expect to happen to the equilibrium price and quantity in the market for orange juice?

Because there are many buyers and sellers in a perfectly competitive market, neither has any power to influence price. They are said to be price takers.

Consider a market in equilibrium. Firms who advertise in this market are attempting to shift the

List at least five of the seven assumptions upon which the model of supply and demand is based.

Refer to Table 3-1. Given this data, the equilibrium price and quantity of CD players are ? Table 3-1 QUANTITY QUANTITY DEMANDED SUPPLIED 100 1000 100 150 900 300 200 800 500 250 600 600 300 300 650 ?