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

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

Even when the demand for one good is high, the price of the good is also affected by supply. The textbook illustrates this by comparing the price of two items that were auctioned on the same day. Which of the following describes the results of the auction?

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

The supply curve for watches

Figure 3-1 -Suppose that when the price of raspberries increases, Lonnie increases his purchases of papayas. To Lonnie,

If, in response to an increase in the price of pineapples, the quantity demanded of pineapples decreases, economists would describe this as

George Gnat subscribes to a monthly pest control service for his home. Last week the owner of the service informed George that he will have to raise his monthly service fee because of increases in the price of gasoline used by his workers on their service trips. How is the market for pest control services affected by this?

Prices of California Merlot wine (assume that this is a normal good) have risen steadily in recent years. Over this same period, prices for French oak barrels used for wine storage have dropped and consumer incomes have risen. Which of the following best explains the rising prices of California Merlots?

Article Summary A growing number of U.S. citizens are going to other countries for elective surgery procedures. Improved quality and significant cost savings abroad have attracted an increasing number of what are being referred to as American medical tourists, especially those who either do not have insurance or whose insurance does not cover the desired procedure. As few as five years ago, Americans tended to travel to countries such as Thailand or Mexico for the procedures, but many are now choosing to go to Europe, where governments and hospitals are now publicizing these services. Many of the procedures being done overseas are joint replacement, and partly in response to the number of patients going abroad for these procedures, programs are being developed to reduce the cost of these surgeries in the United States. Source: Elizabeth Rosenthal, "The Growing Popularity of Having Surgery Overseas," New York Times, August 6, 2013. -Refer to the Article Summary. If European governments and hospitals continue to publicize their existing services to American medical tourists and more Americans consider joint-replacement surgery to improve their quality of life, what will happen in the market for joint-replacement surgery as a result of these two factors?

Figure 3-4 -Refer to Figure 3-4. At a price of $25, how many units will be sold?

If the price of peaches, a substitute for plums, increases, the demand for plums will decrease.

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

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

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) The equilibrium point will move from A to E.

For each of the following pairs of products, state which are complements, which are substitutes, and which are unrelated. a. Digital camera and memory stick b. 7Up and Mountain Dew c. Swimsuits and flip-flops d. Tylenol and cat food e. Photocopier and paper

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) none of the points shown

Figure 3-8 -The cost of raising beef cattle has risen at the same time as consumer preference for beef has fallen. In the market for beef, this would be represented by the equilibrium price ________ and the equilibrium quantity ________.

If a demand curve shifts to the left, then

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

Suppose that when the price of oranges decreases, Sarita decreases her purchases of peaches. To Sarita,