Exam 27: Simple Analytics of Supply and Demand

-In Diagram 27a, the demand curve represented by line D shows

Understand and describe what happens when a market is not in equilibrium. -Draw a simple supply and demand curve diagram for coffee. Assume that incomes of consumer are rising. What happens to demand and supply? What happens to equilibrium price and quantity?

Explain the limitations of elasticity (demand, supply, income, and cross-price). -What are some problems with measuring the various types of elasticities?

Understand and describe what happens when a market is not in equilibrium. -What factors can cause a change in supply? What causes a change in the quantity ?supplied?

Understand and describe what happens when a market is not in equilibrium. -Use supply and demand to explain excess demand. What might cause excess demand? Describe the process that eliminates excess demand.

Whats defention of terms: -law of demand

Whats defention of terms: -demand curve

Whats defention of terms: -identification problem

$\text { Table } 27 \text { a }$ Price Quantity Demanded Quantity Demanded in January in February \ 35,000 35,000 40,000 \ 30,000 40,000 45,000 \ 25,000 45,000 50,000 \ 20,000 50,000 55,000 \ 15,000 55,000 60,000 -Assume Table 27a represents demand schedules for Ford Explorers. In January consumers would have been willing to purchase 45,000 cars at a price of $25,000. In February, they would have been willing to purchase 50,000 cars at a price of $25,000. This change represents

Whats defention of terms: -perfectly inelastic

If the quantity demanded of good A falls when the price of good B rises, then good A and good B are

Whats defention of terms: -necessity goods

Whats defention of terms: -perfectly elastic

Whats defention of terms: -cross-price elasticity

Whats defention of terms: -total revenue

Understand and describe what happens when a market is not in equilibrium. -Would a firm planning a price increase be better off if the demand for its product was elastic or inelastic? Explain.

Understand and describe what happens when a market is not in equilibrium. -What three factors can cause a change in demand? What factor can cause a change in the quantity demanded?

$\text { Table } 27.1 \mathrm{a}$ Price Quantity Demanded Quantity Supplied per per month month 35,000 35,000 55,000 \ 30,000 40,000 50,000 \ 25,000 45,000 45,000 \ 20,000 50,000 40,000 15,000 55,000 35,000 -Assume Diagram 27.1a represents the market for wheat bread. What is a possible cause of the shift in demand from D₁ to D₂?

-Assume Diagram 27.1b represents the market for wheat bread. What is a possible cause of the shift in demand from S₁ to S₂?

$\text { Table } 27.1 \mathrm{a}$ Price Quantity Demanded Quantity Supplied per per month month 35,000 35,000 55,000 \ 30,000 40,000 50,000 \ 25,000 45,000 45,000 \ 20,000 50,000 40,000 15,000 55,000 35,000 -Assume Diagram 27.1a represents the market for wheat bread. The shift in demand from D₁ to D₂ will