Exam 2: Demand, Supply, and Market Equilibrium

Use the following general linear demand relation to answer questions : $Q _ { d } = 680 - 9 P + 0.006 M - 4 P _ { R }$ where M is income and $P _ { R }$ is the price of a related good, R. -If M = $15,000 and $P _ { R }$ = $20 and the supply function is $Q _ { s } = 30 + 3 P$ , then, when the price of the good is $60,

The general demand and supply functions for good A are estimated to be, respectively: =52.50-2.0P+0.0150M+7.00 =-500.0+8.0P where $Q _ { d }$ is quantity demanded per month, $Q _ { s }$ is quantity supplied per month, P is price of good A, M is average household income, and $P _ { R }$ is the price of a related good R Assume the following values of the shift variables: M = $42,500, and $P _ { R }$ = $30. a. The equation for INVERSE demand is _________________________. b. The maximum price at which 500 units of good A can be sold is ____________. c. The minimum price producers will accept to supply 500 units of good A is ________. d. If price is $150, ______________ (a shortage, a surplus, equilibrium) occurs of ___________ units of good A. e. The market clearing price of good A is $__________.

Suppose that the market for salad dressing is in equilibrium. Then the price of lettuce rises. What will happen?

Yesterday's newspaper reported the results of a study indicating that people who eat more bananas are more attractive to the opposite sex. What do you expect to happen to the market price and quantity of bananas?

You are a financial analyst with a specialization in the motion picture industry. You have been hired to analyze the prices of movie theater tickets. The following two events are occurring simultaneously) in the United States: (i) A new national chain opens new multi-screen movie theaters in most U.S. cities. (ii) Movie theaters cut the price of popcorn and soft drinks in half. a. Draw a demand-and-supply graph showing equilibrium in the market for movie tickets before the above two events take place. Label the axes and curves. Label the initial equilibrium - before events (i) and (ii)- as $P _ { 0 }$ and $Q _ { 0 }$ on your graph. b. Now show on your graph how event (i) affects the demand or supply curves for movie tickets. Briefly explain which of the demand or supply variables caused the effect you are showing on your graph. c. Now show on your graph how event (ii) affects the demand or supply curves for movie tickets. Briefly explain which of the demand or supply variables caused the effect you are showing on your graph. d. Based on your graphic analysis, what do you predict will happen to the equilibrium price of movie tickets? The equilibrium quantity of movie tickets?

$Q _ { s } = 40 + 6 P - 8 P _ { I } + 10 F$ where $Q _ { s }$ is the quantity supplied of the good, P is the price of the good, $P _ { I }$ is the price of an input, and F is the number of firms producing the good. -When $P _ { I }$ = $40 and F = 50, the INVERSE supply function is

Use the following demand and supply functions to answer the following. Demand: $Q _ { d } = 50 - 4 P$ Supply: $Q _ { s } = 20 + 2 P$ -Equilibrium price and output are

When price is lower than the equilibrium price, quantity supplied is ____________ than quantity demanded, and excess ____________ exists.

The following events occur simultaneously: (i) The price of beef rises (beef and leather both come from cows). (ii) The price of alligator hides increases. b. Draw a demand-and-supply graph showing equilibrium in the market for leather before the two events described above. Label the axes and curves. Label the initial equilibrium - before events (i) and (ii)- as $P _ { 0 }$ and $Q _ { 0 }$ on your graph. c. Now show on your graph how event (i) affects the demand or supply curves for leather. Briefly explain which of the demand or supply variables caused the effect you are showing on your graph. d. Now show on your graph how event (ii) affects the demand or supply curves for leather. Briefly explain which of the demand or supply variables caused the effect you are showing on your graph. e. Based on your graphic analysis, what do you predict will happen to the equilibrium price of leather? The equilibrium quantity of leather?

Demand: $Q _ { d } = 900 - 60 P$ Supply: $Q _ { s } = - 200 + 50 \mathrm { P }$ -If the price is currently $11, there is a

A "puppy boom" and an increase in the price of horse meat would cause the market price of dog food to

Demand: $Q _ { d } = 900 - 60 P$ Supply: $Q _ { s } = - 200 + 50 \mathrm { P }$ -Let supply remain constant; an increase in income causes consumers to be willing and able to buy 220 more units at each price than they were previously. The new equilibrium price and quantity are

With a given supply curve, a decrease in demand leads to

Use the following general linear demand relation to answer questions : $Q _ { d } = 680 - 9 P + 0.006 M - 4 P _ { R }$ where M is income and $P _ { R }$ is the price of a related good, R. -If M = $15,000 and $P _ { R }$ = $20 and the supply function is $Q _ { s } = 30 + 3 P$ , equilibrium price and quantity are, respectively,

Use the following demand and supply functions to answer the following. Demand: $Q _ { d } = 50 - 4 P$ Supply: $Q _ { s } = 20 + 2 P$ - If the price is $2, there is a

The general linear demand function below is used to answer questions : $Q _ { d } = a + b P + c M + d P _ { R }$ where Q_d = quantity demanded, P = the price of the good, M = income, $P _ { R }$ = the price of a good related in consumption. -For the general linear demand function given above

If the price of a complement decreases, all else equal,

$Q _ { d } = 100 - 5 P + 0.004 M - 5 P _ { R }$ ,where P is the price of good X, M is income, and $P _ { R }$ is the price of a related good, R. -If Income is $100,000, the price of the related good is $20, and the supply function is Q_s = 150 + 5P. What is the equilibrium price?

If the market price of eggs rises at the same time as the market quantity of eggs purchased decreases, this could have been caused by

-Let supply remain constant at S; a decrease in income causes consumers to be willing and able to purchase 150 fewer units at each price than they were previously.