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

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 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for Fruitopia,a soft drink.Which panel describes what happens in the market for Fruitopia when the price of Snapple,a substitute product,decreases?

If consumers believe the price of iPads will decrease in the future,this will cause the demand for iPads to decrease now.

Figure 3-4 -Refer to Figure 3-4.If the price is $20

A change in which variable will change the market demand for a product?

In a perfectly competitive market,there are ________ buyers and ________ sellers.

If the demand for a product increases and the supply of the product does not change,equilibrium price and equilibrium quantity will both increase.

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

When the price of a good rises,consumers buy a smaller quantity because of the ________ effect and the ________ effect.

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

Indicate whether each of the following situations would shift the supply curve to the left,to the right,or not at all. a.An increase in the number of firms in the market b.An increase in the current price of the product c.A decrease in productivity d.An increase in the expected future price of a product e.A decrease in the price of an input

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

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

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)?

Assume there is a shortage in the market for digital music players.Which of the following statements correctly describes this situation?

If the amount of carbonated sodas consumed continues to decline as consumers continue to choose to buy healthier products,this will likely

Factors that will tend to lead to higher demand for premium bottled water include all of the following except

Figure 3-1 -Refer to Figure 3-1.A decrease in the price of a substitute good would be represented by a movement from

The phrase "demand has increased" means that

If the demand curve for a product shifts to the right and the supply curve for the product shifts to the left,equilibrium price and equilibrium quantity will both increase.