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

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

If the number of firms producing mouthwash increases and consumer preference for mouthwash increases,the equilibrium price of mouthwash will definitely increase.

Which of the following would shift the supply curve for MP3 players to the right?

A change in which variable will change the market demand for a product?

Suppose that when the price of raspberries increases,Lonnie increases his purchases of papayas.To Lonnie,

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?

Draw a demand curve and label it D1.On the graph,illustrate an increase in demand and a decrease in demand,and label the curves D2 and D3,respectively.Starting on demand curve D1,explain the shift that would result from each of the following events: a.an increase in income and the good is a normal good b.an increase in income and the good is an inferior good c.a decrease in the price of a substitute good d.a decrease in the price of a complementary good e.an increase in the taste for the good f.a decrease in population g.an increase in the expected future price of the good

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 D₂ and S₁ (point C) Which of the following changes would cause the equilibrium to change to point B?

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

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 there is a shortage of apples how will the equilibrium point change?

Explain the endowment effect.

Behavioural economists examine choices that consumers make that are not economically rational.Economists generally assume that people are rational; that is,they weigh the benefits and costs of an action and choose an action only if the benefits outweigh the costs.Why do consumers not act rationally when the result is that they make themselves worse off?

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 statements is true?

All else being equal,the decrease in consumer preference predicted by Apple for its iPhone 5 would be represented by a

Figure 3-4 -Refer to Figure 3-4.If the price is $10,

The income effect of a price change refers to the impact of a change in

Which of the following would cause an increase in the equilibrium price and an increase in the equilibrium quantity of watermelons?

Standard economic theory asserts that sunk costs are irrelevant in making economic decisions,yet studies conducted by behavioural economists reveal that sunk costs often affect economic decisions.Which of the following could explain this observation?

Figure 3-7 -Refer to Figure 3-7.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 -Refer to Figure 3-1.A decrease in the price of a substitute good would be represented by a movement from