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

If, in the market for peaches, the supply curve has shifted to the left:

Suppose that when the price of hamburgers decreases, the Ruiz family increases their purchases of tomato sauce. To the Ruiz family:

Figure 3.8 -Refer to Figure 3.8. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D₁ and S₁ (point A). If the price of oranges, a substitute for apples, decreases and the wages of apple workers increase, how will the equilibrium point change?

'Because corn chips and salsa are complements, an increase in the price of corn chips will cause the demand for salsa to decrease. This initial shift in demand for corn chips results in a higher price for corn chips; this higher price will cause the demand curve for corn chips to shift to the right.' Which of the following correctly comments on this statement?

Assume that the demand curve for tablet computers shifts to the right and the supply curve for tablet computers shift to the left, but the supply curve shifts more than the demand curve. As a result:

How would a decrease in the price of tablet computers affect the market for laptop computers (a substitute), all else being equal?

The ________ effect refers to the change in quantity demanded for a good that results from the effect of a change in the good's price on consumers' purchasing power.

Assume that the demand curve for tablet computers shifts to the right and the supply curve for tablet computers shift to the left, but the supply curve shifts less than the demand curve. As a result:

A decrease in supply is represented by a leftward shift of the supply curve.

In each of the following situations, list what will happen to the equilibrium price and the equilibrium quantity for a particular product, which is an inferior good. a.The population increases and productivity increases. b.The income increases and the price of inputs decrease. c.The number of firms in the market decreases and income increases. d.Consumer preference increases and the price of a complement decreases. e.The price of a substitute in consumption decreases and the price of a substitute in production decreases. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Figure 3.2 -Refer to Figure 3.2. An increase in price of inputs would be represented by a movement from:

A 'surplus' occurs when the actual selling price is above the market equilibrium price.

Figure 3.7 -Refer to Figure 3.7. Assume that the graphs in this figure represent the demand and supply curves for used clothing, an inferior good. Which panel describes what happens in this market as a result of a decrease in income?

Which of the following would cause the equilibrium price of white bread to decrease and the equilibrium quantity of white bread to increase?

If the Apple iPad and other tablets are considered substitutes, then, other things equal, a decrease in the price of the iPad will:

Which of the following statements is true?

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

If a positive change in technology caused an increase in the supply of flat-screen televisions, ________.

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

The substitution effect explains why there is a direct relationship between the price of a product and the quantity of the product demanded.