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

The following appeared in a Florida newspaper a week after a hurricane hit the state."Floridians are relieved that the storm produced no fatalities but homeowners face weeks,if not months,of rebuilding.Matters are made worse by the soaring prices of plywood and other building materials that always follow in a hurricane's path.Complaints of profiteering and price gouging have not deterred firms from raising their prices by over 100 percent." Which of the following offers the best explanation for the price increases referred to in the article?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for Fruitopia,a soft drink.Which panel describes what happens in the market for Fruitopia when the price of Snapple,a substitute product,decreases?

Suppose that when the price of hamburgers decreases,the Ruiz family increases their purchases of ketchup.To the Ruiz family

As the number of firms in a market increases,the supply curve will shift to the left and the equilibrium price will rise.

If a firm expects that the price of its product will be lower in the future than it is today

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

Suppose that when the price of ice cream increases,Liza decreases her purchase of hot fudge.To Liza

Because new plastic and recycled plastic are substitutes,as the price of newly produced plastic increases,

The supply curve for umbrellas

Article Summary More than a million Americans are estimated to have gone to other countries in 2014 for medical procedures.Documentary filmmaker Morgan Spurlock was among those Americans who travelled abroad in 2014 to partake in what is being referred to as "medical tourism." From his own experience and those of others who had also travelled for medical procedures,Spurlock found that there can be distinct advantages to medical tourism for certain patients and procedures.Those advantages include: The level of care offered in many hospitals,with the best hospitals reportedly meeting or exceeding Western standards;Significantly lower costs,examples of which include a heart bypass operation in the United States that typically runs $88,000 can cost as little as $31,500 in Costa Rica,and hip replacement surgery that averages $33,000 domestically is only $12,400 in Thailand;The ability to combine medical procedures with vacations to amazing locations around the globe. -Refer to the Article Summary.Assume that more foreign governments and hospitals begin to offer and publicize their medical services to American medical tourists and,due to the growing number of aging baby boomers,more Americans desire hip-replacement surgery.All else equal,what will happen in the market for hip-replacement surgery as a result of these two factors?

Figure 3-5 -Refer to Figure 3-5.At a price of $20,the quantity sold

A shortage occurs when the market price is lower than the equilibrium price.

A decrease in the number of firms in a market will cause supply to increase.

How does the decreasing use of traditional cameras affect the market for traditional camera film?

In April,market analysts predict that the price of titanium will fall in May.What happens in the titanium market in April,holding everything else constant?

An increase in population results in an increase in demand.

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

Assume there is a shortage in the market for digital music players.Which of the following statements correctly describes this situation?

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

Explain the differences between a change in supply and a change in quantity supplied.