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

Figure 3-5 -Refer to Figure 3-5.In a free market such as that depicted above, a surplus is eliminated by

What is the law of supply? What does this law imply about the shape of the supply curve?

Holding everything else constant, an increase in the price of MP3 players will result in

Figure 3-1 -Refer to Figure 3-1.An increase in population would be represented by a movement from

The income effect of a price change refers to the impact of a change in

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

If the population increases and input prices decrease, the equilibrium quantity of a product will definitely increase.

Positive technological change in the production of LCD televisions caused the price of LCD televisions to fall.Holding everything else constant, how would this affect the market for Blu-ray players (a complement to LCD televisions)?

Suppose a negative technological change in the production of disease-resistant wheat caused the price of wheat to rise.Holding everything else constant, how would this affect the market for corn (a substitute for wheat)?

If in the market for oranges the supply has increased, then

Figure 3-6 -Refer to Figure 3-6.The figure above represents the market for canvas tote bags.Compare the conditions in the market when the price is $50 and when the price is $35.Which of the following describes how the market differs at these prices?

Technological advancements have led to lower prices and an increase in the sale of digital cameras.How does this affect the digital photo printing paper market?

If a firm expects that the price of its product will be higher in the future than it is today, then

Figure 3-4 -Refer to Figure 3-4.If the current market price is $10, the market will achieve equilibrium by

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?

Figure 3-5 -Refer to Figure 3-5.At a price of $10, the quantity sold

Discuss the correct and incorrect economic analysis in the following statement. "The United 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 a decrease in the supply of automobiles because the cost of production has increased.These effects cancel each other out resulting in no change in equilibrium price and quantity in the automobile market."

Holding everything else constant, a decrease in the price of bicycles will result in

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for bicycle helmets.Which panel best describes what happens in this market if there is a substantial increase in the price of bicycles?

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