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

Consider the collectors' market for first editions of two popular children's books,Harry Potter and the Order of the Phoenix by J.K.Rowling and Ruby in the Smoke by Philip Pullman.Sales of the Harry Potter novel are much greater than sales of Ruby in the Smoke yet the price of the Harry Potter novel is much lower than the price of Pullman's novel. a.On one large diagram,draw a demand and supply graph for first editions of Harry Potter and the Order of the Phoenix and another demand and supply graph for first editions of Ruby in the Smoke. b.Show how it is possible for the price of the Harry Potter novel to be much lower than the price of Pullman's novel,even though the demand for the Harry Potter novel is much greater than the demand for Ruby in the Smoke. c.Provide a written explanation to accompany your graphical illustration.

An increase in the equilibrium quantity of a product will result

Suppose that when the price of hamburgers increases,the Ruiz family increases their purchases of hot dogs.To the Ruiz family

During the 1990s positive technological change in the production of chicken caused the price of chicken to fall.Holding everything else constant,how would this affect the market for pork (a substitute for chicken)?

"The price of compact fluorescent light bulbs fell because of improvements in production technology.As a result,the demand for incandescent light bulbs decreased.This caused the price of incandescent light bulbs to fall; as the price of incandescent light bulbs fell the demand for incandescent light bulbs decreased even further." Evaluate this statement.

Would a change in the price of in-line skates cause a change in the supply of in-line skates? Why or why not?

Assume that in recent years the cost of producing microbrew beer in the U.S.has decreased largely due to technological improvements.At the same time,more and more Americans prefer microbrew beer over wine.Which of the following best explains the effect of these events in the microbrew beer market?

Nearly one-fifth of China's 1.38 billion people are under the age of 15.How will this affect high school enrollment over the next fifteen years? The labor market over the next fifteen years?

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

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

Figure 3-2 -Refer to Figure 3-2.An increase in the expected future price of the product would be represented by a movement from

Select the phrase that correctly completes the following statement."A decrease in the expected future price caused an increase in the supply of smartphones.As a result

If a demand curve shifts to the left,then

Auctions in recent years have resulted in higher prices paid for letters written by John Wilkes Booth than those written by Abraham Lincoln.What is a reason for this difference in price?

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D₂ and S₁ (point C) If the price of motorcycle side cars (a complement to motorcycles) decreases, and the wages of motorcycle workers increase, how will the equilibrium point change?

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?

The law of demand implies,holding everything else constant,that as the price of gelato

Figure 3-1 -Refer to Figure 3-1.If the product represented is a normal good,a decrease in income would be represented by a movement from

Buyers scrambled to secure stocks of Australian wool following a forecast of an 11 percent decline in wool production.What happens in the Australian wool market as a result of this announcement?

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