Exam 3: Where Prices Come From: the Interaction of Demand and Supply

Discuss the correct and incorrect economic analysis in the following statement. "The United Auto Workers Union has successfully negotiated a 9 percent increase in wages for its workers. This increase in the wage rate causes an increase in demand for automobiles, since many consumers now have greater incomes, and also a decrease in the supply of automobiles because the cost of production has increased. These effects cancel each other out resulting in no change in equilibrium price and quantity in the automobile market."

An decrease in supply is caused by a decrease in the price of the product.

In recent years, the cost of producing organic produce in the United States has decreased largely due technological advancement. At the same time, more and more Americans prefer organic produce over conventional produce. Which of the following best explains the effect of these events in the organic produce market?

If an increase in income leads to an increase in the demand for sushi, then sushi is

If a demand curve shifts to the right, then

Assume that potatoes are an inferior good. Which of the following would cause both the equilibrium price and equilibrium quantity of potatoes to decrease?

The ________ effect refers to the change in quantity demanded for a good that results from the effect of a change in the good's price on consumer's purchasing power.

What is the Law of Demand.

Figure 3-5 -Refer to Figure 3-5. At a price of $20,

Assume that the hourly price for the services of tarot card readers has risen and sales of these services have also risen. One can conclude that

Factors that will tend to lead to higher demand for premium bottled water include all of the following except

Tom Searchinger, a senior attorney at the Environmental Defense Fund, observed that generous farm subsidies have encouraged farmers to produce more corn and more wheat. How does this affect the market for fertilizer?

The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in the price of a substitute product.

In each of the following situations, list what will happen to the equilibrium price and the equilibrium quantity for a particular product, which is an inferior good. a. The population increases and productivity increases. b. Income increases and the price of inputs decrease. c. The number of firms in the market decreases and income increases. d. Consumer preference increases and the price of a complement decreases. e. The price of a substitute in consumption decreases and the price of a substitute in production decreases.

As the number of firms in a market decreases, the supply curve will shift to the left and the equilibrium price will fall.

Which of the following has occurred as the millennial generation has come of age?

Figure 3-4 -Refer to Figure 3-4. At a price of $20, how many units will be sold?

Technological advancements have led to lower prices and an increase in the sale of color laser printers. How does this affect the market for traditional inkjet printers?

The supply curve for watches

In each of the following situations, list what will happen to the equilibrium price and the equilibrium quantity for a particular product, which is a normal good. a. The population increases and the price of inputs increase. b. The price of a complement increases and technology advances. c. The number of firms in the market increases and income increases. d. Price is expected to increase in the future. e. Consumer preference increases and the price of a substitute in production decreases.