Exam 4: Supply and Demand: an Initial Look

Draw a graph of a market in equilibrium. Describe what might cause a change in demand or supply and how this would affect the diagram. Indicate how the equilibrium price and quantity will change.

Firms often seek to borrow money to expand their capital stock, and the price they pay for that money is the interest rate. What happens to the demand for money if the interest rate increases?

Price ceilings lead to market surpluses.

A common misperception about consumer demand is that

Consumers expressed outrage at the high price of chainsaws after Hurricane Andrew hit Florida and Louisiana, with newspaper editorials accusing suppliers of unconscionable price gouging. Use a supply and demand graph to assist in explaining the increase in the price of chain saws after Hurricane Andrew.

Relative to the prices that would be observed in an uncontrolled market, prices charged in a black market are generally

The laws of supply and demand force prices to an equilibrium.

Price controls date back to

If the price of oil, a close substitute for coal, increases then the

An economist would predict that if the government imposes price controls on medical care, the result will be an increase in the supply of affordable care in the United States.

Consumer income changes can shift market demand.

If the price of coal, a close substitute for oil, decreases, then the

A supply schedule shows

There is general agreement among economists that rent controls cause shortages of housing, but despite this rent controls continue to persist. Why does this occur?

A change in the price of important inputs will change the quantity supplied but will not shift the supply curve.

The demand for a textbook written by Schwarz and Mobley is Q = 20,000 − 50P; supply is Q = 2,000 + 100P. Students complain about the high price of textbooks, so a price ceiling is imposed, which unfortunately leads to a shortage of texts. Below what price will shortages occur?

A price above equilibrium always yields a surplus.

If price of a good rises, what happens to the demand for that good, all other things held constant?

Ticket "scalping" is an example of

The mechanism of supply and demand is