Exam 4: Supply and Demand: An Initial Look

Figure 4-19 -After a strike against the Financial News in London began,the number of copies of the competing Broad Street Journal sold in England increased dramatically,yet there was no increase in price.Which supply and demand graph in Figure 4-19 represents the situation for the Broad Street Journal before the strike started?

Producers were accused of price gouging as the price of bottled water soared after Hurricane Andrew.Consumers clamored for price controls to keep bottled water at pre-Andrew levels.Use supply and demand analysis to graphically show the effect of setting a price ceiling on bottled water after Hurricane Andrew at the pre-hurricane equilibrium price.Use your graph to assist in explaining the likely unintended effects of such a price control.Be sure that your graph is completely and correctly labeled.

A minimum wage law may cause unemployment among low-skill workers.

Firms often seek to borrow money to expand their capital stock,and the price they pay for that money is the interest rate.What happens to the demand for money if the interest rate increases?

In some markets,demand can be approximated by Q = 50 - 5P + 10Y where Q is quantity,P price per unit,and Y = buyers' income.Supply can be approximated by Q = -5 + 10P. a.If Y = 20, what is equilibrium price and output? b.If Y rises to 25, what is the new equilibrium price and output?

Why does quantity demanded decrease when price increases?

Figure 4-16 -Assume that Figure 4-16 shows the supply of new houses.An improvement in the technology for building houses will shift supply from

Changes in the size of an industry may cause supply to shift.

Figure 4-1 -If the government has stated that it will pay whatever it must to obtain 1,000 units of good X,which demand curve in Figure 4-1 is appropriate?

Figure 4-4 -In Figure 4-4,an increase in population will change demand from

A decrease in supply will have what effect on equilibrium price and quantity?

Cost-reducing technological advancements allow suppliers to earn more profits but have no noticeable effect on the supply curve.

Which of the following would cause a movement up (or leftward)along the demand curve for European autos in the United States?

The supply curve of books (which are produced using paper made from trees)will shift to the left in response to

The United States typically experiences a large surplus of milk annually.This is caused by

If price rises,what happens to quantity supplied for a product?

An important assumption that is made when constructing a demand schedule is that

Figure 4-4 -Assume that Figure 4-4 shows demand for steak.An increase in income of buyers will change demand from

If price rises,what happens to quantity demanded for a product?

The following are common errors students make when discussing supply and demand.What is the mistake in each? a.At equilibrium, demand equals supply. b.The quantity of demand is greater than the quantity of supply. c.They move along the line from both ends to an equilibrium in the middle. d.The increase in demand causes an increase in supply.