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

Figure 3.3 -Refer to Figure 3.3.The figure above shows the supply and demand curves for two markets: the market for original Picasso paintings and the market for designer jeans.Which graph most likely represents which market?

If a firm has an incentive to increase supply now and decrease supply in the future, the firm expects that the

Discuss the correct and incorrect economic analysis in the following statements. "The Canadian Auto Workers union has successfully negotiated a 9 percent increase in wages for its workers.This increase in the wage rate causes an increase in demand for automobiles, since many consumers now have greater incomes, and also causes a decrease in supply of automobiles because the cost of production has increased.These effects cancel each other out resulting in no change in the equilibrium price and quantity in the automobile market."

If Canada bans the importation of beluga caviar (the most prized of caviars)from the Caspian Sea, what happens in the market for caviar in Canada?

Explain the difference between a normal good and an inferior good.

Which of the following is the correct way to describe equilibrium in a market?

Figure 3.4 -Refer to Figure 3.4.If the current market price is $10, the market will achieve equilibrium by

Alberta ranchers can raise either cattle or sheep on their land.Which of the following would cause the supply of sheep to increase?

If, in response to an increase in the price of chocolate, the quantity demanded of chocolate decreases economists would describe this as

"Because apples and oranges are substitutes, an increase in the price of oranges will cause the demand for apples to increase.This initial shift in demand for apples results in a higher price for apples; this higher price will cause the demand curve for apples to shift to the right." Which of the following correctly comments on this statement?

Figure 3.2 -Refer to Figure 3.2.An increase in the price of substitutes in production would be represented by a movement from

A supply schedule

Suppose that when the price of raspberries increases, Lonnie increases his purchases of papayas.To Lonnie

Technological advances have resulted in lower prices for digital cameras.What is the impact of this on the market for traditional (non-digital)cameras?

Figure 3.6 -Refer to Figure 3.6.The figure above represents the market for canvas tote bags.Assume that the price of tote bags is $15.At this price:

What would happen in the market for laser eye surgery if provincial health plans started to cover a portion of the price of voluntary procedures?

Which of the following would cause both the equilibrium price and equilibrium quantity of cotton (assume that cotton is a normal good)to increase?

A normal good is a good for which the demanded increases as income decreases, holding everything else constant.

When the price of a normal good falls, consumers buy a larger quantity because of the ________ effect and the ________ effect.