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

Figure 3-1 -How does the increasing use of MP3 players affect the market for compact discs?

An inferior good is a good for which the quantity demanded increases as the price decreases, holding everything else constant.

Discuss the correct and incorrect economic analysis in the following statements. "If good weather in Hawaii creates a bumper crop of pineapples, the supply of pineapples will increase. This will result in a price decrease, which will then cause the supply of pineapples to decrease."

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

A demand curve shows the relationship between

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

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.

Which of the following would cause an increase in the supply of cheese?

Figure 3-7 -Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for ramen noodles, an inferior good. Which panel describes what happens in this market as a result of an increase in income?

Which of the following statements is true?

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 income effect of a price change results in a

Figure 3-6 -Refer to Figure 3-6. The figure above represents the market for canvas tote bags. Assume that the market price is $35. Which of the following statement is true?

Market equilibrium occurs where supply equals demand.

How has the growing popularity of factory outlet stores affected the market for clothing at retail department stores?

Figure 3-5 -Refer to Figure 3-5. At a price of $10, the quantity sold

If the demand curve for a product shifts to the left and the supply curve for the product shifts to the left, the equilibrium quantity will decrease.

Holding everything else constant, a decrease in the price of GPS systems will result in

Last year, the Pottery Palace supplied 8,000 ceramic pots at $40 each. This year, the company supplied the same quantity of ceramic pots at $55 each. Based on this evidence, The Pottery Palace has experienced

Figure 3-1 -Tom Searchinger, a senior attorney at the Environmental Defense Fund, observed that generous farm subsidies have encouraged farmers to produce more corn and more wheat. How does this affect the market for fertilizer?