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

Suppose that a recent study finds that stricter alcohol policies, such as raising the price of alcohol or banning the sale of alcohol close to university campuses, decrease the number of students who use marijuana.On the basis of this information, how would you describe alcohol and marijuana?

The demand by all the consumers of a given good or service is the ________ for the good or service.

A ________ demand curve for shampoo would be caused by a change in the price of shampoo.

The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in purchasing power as a result of the price change.

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

If the price of potato chips falls, the substitution effect due to the price change will cause

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

Figure 3.8 Alt text for Figure 3.8: In figure 3.8, a graph plotting intersecting supply and demand curves represents the market for canvas tote bags. Long description for Figure 3.8: The x-axis is labelled, Quantity, with the values 0, 10, 20, 50, 75, and 100 marked.The y-axis is labelled, Price, with the values 0, 15, 25, and 50 dollars marked.Curve D is a straight line which slopes down from the top left corner to the bottom right corner.Curve S is a straight line which begins in the bottom left corner and slopes up to the top right corner.The equilibrium of the 2 curves is (50,25).The point plotted on curve S to the left of equilibrium is (20,15).The point plotted on curve D to the right of point of equilibrium is (75,15).The point plotted to the right of equilibrium on curve S is (100,50).The point plotted to the right of the equilibrium on curve D is (10,50). -Refer to Figure 3.8.The figure above represents the market for canvas tote bags.Assume that the market price is $35.Which of the following statements is true?

In January, buyers of gold expect that the price of gold will rise in February.What happens in the gold market in January, holding all else constant?

Figure 3.13 Alt text for Figure 3.13a: In figure 3.13a, a graph of intersecting demand and supply curves represents a rising supply of bicycle helmets. Long description for Figure 3.13a: The x-axis is labelled, Quantity and the y-axis is labelled, as Price.Curve D1 is a straight line which slopes down from the top left corner to the bottom right corner.Curve S1 is a straight line which slopes up from the bottom left to the top right.The point of intersection is at the midpoints of both lines.Curve S2 is a straight line, parallel to curve S1, but plotted to the right.A right pointing arrow indicates the change from S1 to S2. Alt text for Figure 3.13b: In figure 3.13b, a graph of intersecting demand and supply curves represents a falling supply of bicycle helmets. Long description for Figure 3.13b: The x-axis is labelled, Quantity and the y-axis is labelled, as Price.Curve D1 is a straight line which slopes down from the top left corner to the bottom right corner.Curve S1 is a straight line which slopes up from the bottom left to the top right.The point of intersection is at the midpoints of both lines.Curve S2 is a straight line, parallel to curve S1, but plotted to the left.A left pointing arrow indicates the change from S1 to S2. Alt text for Figure 3.13c: In figure 3.13c, a graph of intersecting demand and supply curves represents a rising demand for bicycle helmets. Long description for Figure 3.13c: The x-axis is labelled, Quantity and the y-axis is labelled, as Price.Curve D1 is a straight line which slopes down from the top left corner to the bottom right corner.Curve S1 is a straight line which slopes up from the bottom left to the top right.The point of intersection is at the midpoints of both lines.Curve D2 is a straight line, parallel to curve D1, but plotted to the right.A right pointing arrow indicates the change from D1 to D2. Alt text for Figure 3.13d: In figure 3.13d, a graph of intersecting demand and supply curves represents a falling demand for bicycle helmets. Long description for Figure 3.13d: The x-axis is labelled, Quantity and the y-axis is labelled, as Price.Curve D1 is a straight line which slopes down from the top left corner to the bottom right corner.Curve S1 is a straight line which slopes up from the bottom left to the top right.The point of intersection is at the midpoints of both lines.Curve D2 is a straight line, parallel to curve D1, but plotted to the left.A left pointing arrow indicates the change from D1 to D2. -Refer to Figure 3.13.Assume that the graphs in this figure represent the demand and supply curves for women's clothing.Which panel best describes what happens in this market when the wages of seamstresses rise?

Figure 3.1 Alt text for Figure 3.1: In figure 3.1, graph of the effect of an increase in population on the demand curve. Long description for Figure 3.1: The x-axis is labelled, Quantity, and y-axis is labelled, Price.Curve Demand, D1, is a straight line which slopes down from the top left corner to the bottom right corner.Curve D2 follows the same slope as curve D1, but is plotted to the right.2 points, A and B, are plotted in the middle of curve D1.A right pointing arrow indicates the change from curve D1 to curve D2. -Refer to Figure 3.1.If the product represented is an inferior good, an increase in income would be represented by a movement from

Table 3.5 -Refer to Table 3.5.The equations above describe the demand and supply for Aunt Maud's Premium Hand Lotion.What are the equilibrium price and quantity (in thousands)for Aunt Maud's Lotion?

"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?

The supply curve for watches

If a demand curve shifts to the right, then

Figure 3.10 Alt text for Figure 3.10: In figure 3.10, a graph plotting intersecting supply and demand curves illustrates how supply and demand function in competitive markets. Long description for Figure 3.10: The x-axis is labelled, Quantity, with the values 0, 200, 400, 500, 600, 700 and 800 marked.The y-axis is labelled, Price, with the values 0, 10.00, 15.00, 20.00 and 25.00 dollars marked.Supply Curve S is a straight line which slopes up from the bottom left corner to the top right corner.4 points are plotted along the curve; (200, 10), (400, 15), (600, 20), and (800, 25).Demand curve D is a straight line which slopes down from the top left corner to the bottom right corner.Curve D intersects the S curve at (600, 20), and passes through another point, (800, 10).All plotted points are connected to the corresponding values on the x and y-axis with dotted lines. -Refer to Figure 3.10.At a price of $25, how many units will be sold?

If the demand for a product increases and the supply of the same product increases, the equilibrium price will increase.

Figure 3.10 Alt text for Figure 3.10: In figure 3.10, a graph plotting intersecting supply and demand curves illustrates how supply and demand function in competitive markets. Long description for Figure 3.10: The x-axis is labelled, Quantity, with the values 0, 200, 400, 500, 600, 700 and 800 marked.The y-axis is labelled, Price, with the values 0, 10.00, 15.00, 20.00 and 25.00 dollars marked.Supply Curve S is a straight line which slopes up from the bottom left corner to the top right corner.4 points are plotted along the curve; (200, 10), (400, 15), (600, 20), and (800, 25).Demand curve D is a straight line which slopes down from the top left corner to the bottom right corner.Curve D intersects the S curve at (600, 20), and passes through another point, (800, 10).All plotted points are connected to the corresponding values on the x and y-axis with dotted lines. -Refer to Figure 3.10.If the price is $25,

If the price of gasoline increases, what will be the impact in the market for public transportation?

Once a good is considered inferior, it will always be considered inferior.