Exam 3: Demand and Supply

Last year a very severe ice storm hit the north counties of New York state, and the states of Vermont and Maine. Electric poles were down and no one had power for days. It was reported that the price of kerosene heaters skyrocketed and the number purchased increased during this time. Using a supply and demand diagram, show the impact of the ice storm on the market for kerosene heaters.

If the price of crude oil falls, the equilibrium price of gasoline ________ and the equilibrium quantity ________.

-The table gives the demand and supply schedules for boat rides. If the supply of boat rides increases by 20 rides a day, the price will

If income decreases or the price of a complement rises

If the equilibrium price for a two-liter bottle of Coca-Cola is $1.50 today, just like it was ten years ago, can we safely say that all supply and demand conditions in the market for Coke have remained very stable all these years?

Using supply-and-demand diagrams, show and explain the effects of the following events on the price of CD-Rs and the quantity of CD-Rs sold. For each event, identify which of the determinants of demand or supply is affected, how it influences demand or supply, and what happens to the equilibrium price and quantity. a) The price of a CD burner falls. b) Workers who make CD-Rs get a pay raise. c) Producers introduce new cost-saving technologies in their CD-R production plants. d) Consumers' incomes increase and CD-Rs are a normal good. e) Free peer-to-peer music exchange through the Internet becomes legal.

-The figure above shows the market for candy. People become more concerned that eating candy causes them to gain weight, which they do not like. As a result, the

Which of the following increases the equilibrium price of a used car and decreases the equilibrium quantity?

The quantity supplied of a good or service is the amount that

-In the figure, the equilibrium price is initially $3 per bushel of wheat. If suppliers come to expect that the price of a bushel of wheat will rise in the future, but buyers do not, the current equilibrium price will

In the market for magazines, the "income effect" means that

The "law of demand" states that, other things remaining the same, the quantity demanded of any good is

What is the difference between a normal good and an inferior good? Give an example of each.

Personal computers are becoming less expensive as new technology reduces the cost of production. In a supply and demand model, explain the effects of the technological innovations and their effect on the quantity of computers.

A demand curve is also a willingness-and-ability-to-pay curve.

A relative price is the product of two money prices.

-Consider the demand curves for soft drinks shown in the figure above. A movement from point a to point b represents

When the price of an inferior good falls, the substitution effect leads to ________ in the quantity purchased and the income effect leads to ________ in the quantity purchased.

Bicycles are made out of steel. If the price of steel increases, there is a shift in the supply curve of bicycles that leads to

Which of the following CORRECTLY describes how price adjustments eliminate a shortage?