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

For each of the following pairs of products, state which are complements, which are substitutes, and which are unrelated. a. House plants and potato chips b. Eyeglasses and contact lenses c. Motorcycles and gasoline d. Smartphones and smartphone apps e. Red wine and white wine

If the price of beef jerky rises, then the substitution effect due to the price change will cause

Table 3-3 -Refer to Table 3-3. The table above shows the demand schedules for Kona coffee of two individuals (Luke and Ravi) and the rest of the market. If the price of Kona coffee falls from $6 to $4, the market quantity demanded would

Figure 3-8 -Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D₁ and S₂ (point B). Which of the following changes would cause the equilibrium to change to point C?

If the demand for a product decreases and the supply of the same product increases, the equilibrium quantity will increase.

A firm has an incentive to decrease supply now and increase supply in the future if it expects that

An inferior good is a good for which the quantity demanded decreases as the price increases, holding everything else constant.

Figure 3-7 -Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for almonds. Which panel best describes what happens in this market when there is an increase in the productivity of almond harvesters?

Figure 3-4 -Refer to Figure 3-4. If the price is $25

Table 3-5 -Refer to Table 3-5. The table contains information about the corn market. Use the table to answer the following questions. a. What are the equilibrium price and quantity of corn? b. Suppose the prevailing price is $9 per bushel. Is there a shortage or a surplus in the market? c. What is the quantity of the shortage or surplus? d. How many bushels will be sold if the market price is $9 per bushel? e. If the market price is $9 per bushel, what must happen to restore equilibrium in the market? f. At what price will suppliers be able to sell 24,000 bushels of corn? g. Suppose the market price is $21 per bushel. Is there a shortage or a surplus in the market? h. What is the quantity of the shortage or surplus? i. How many bushels will be sold if the market price is $21 per bushel? j. If the market price is $21 per bushel, what must happen to restore equilibrium in the market?

Figure 3-8 -Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D₁ and S₁ (point A). If there is a surplus of motorcycles how will the equilibrium point change?

Figure 3-4 -Refer to Figure 3-4. If the price is $10,

In July, market analysts predict that the price of gold will rise in August. What happens in the gold market in July, holding everything else constant?

During the 1990s positive technological change in the production of chicken caused the price of chicken to fall. Holding everything else constant, how would this affect the market for pork (a substitute for chicken)?

Which of the following will not shift the demand curve for a good?

Which of the following is evidence of a shortage of walnuts?

Select the phrase that correctly completes the following statement. "A positive change in technology caused an increase in the supply of flat-screen televisions. As a result ________."

Studies have shown that smoking cigarettes can cause heart disease. Assume this is true, and favorable weather has increased the tobacco harvest in North Carolina. In the market for cigarettes, these two developments would

Indicate whether each of the following situations would shift the supply curve to the left, to the right, or not at all. a. An increase in the number of firms in the market b. An increase in the current price of the product c. A decrease in productivity d. An increase in the expected future price of a product e. A decrease in the price of an input

"The price of digital cameras fell because of improvements in production technology. As a result, the demand for non-digital cameras decreased. This caused the price of non-digital cameras to fall; as the price of non-digital cameras fell the demand for non-digital cameras decreased even further." Evaluate this statement.