Question 1

In what ways can expectations change your demand for a product today?

Accepted Answer

Expectations about both future prices and future incomes may affect your demand for a product today. For example, if you expect the price of gasoline to rise tomorrow, you will want to fill up your car's gas tank today. Also, expectations about future incomes may affect purchases today. An individual who believes that he may soon be laid off from his job (and therefore see a drop in his income) will be unlikely to purchase a new car today.

Question 2

What types of things are sold in input or factor markets? Who are the buyers and sellers in these markets?

Accepted Answer

Resources used to produce goods and services are sold in input markets. These include labor, capital, and land. In input markets, households are the sellers (suppliers) and firms are the buyers (demanders).

Question 3

Homebuilders will often pay the closing costs (title, insurance, etc.) of prospective homebuyers? Explain in terms of supply and demand what homebuilders are trying to do with this practice.

Accepted Answer

The homebuilders are simply trying to stimulate demand. By offering to pay prospective homebuyers' closing cost it is almost the equivalent of handing these buyers extra income. Their ability and willingness to pay has increased. It can bring buyers into the market who would able to afford to buy a home except for the obstacle of having to come up with the cash for closing costs.

Question 4

Comment on the following statement: "A decrease in supply will lead to an increase in the price which decreases demand, thus lowering price. Therefore, a decrease in supply has no effect on the price of a good."

Accepted Answer

The statement is incorrect because it co

Question 5

Compare and contrast the concepts of income and wealth. Are these measured as a stock or a flow? Explain.

Accepted Answer

Wealth, or net worth, is the total value

Question 6

Explain the difference between a change in demand and a change in quantity demanded.

Accepted Answer

A change in demand is represented by a s

Question 7

Even though household have wide-ranging preferences, discuss some of the things that all households have in common including their constraints.

Accepted Answer

All households have limited income and a

Question 8

Explain how an increase in the price of leather brought about by shift in tastes may lead to an increase in the supply of beef.

Accepted Answer

An increase in the price of leather will

Question 9

SCENARIO 3: Events prior to the 1995 baseball season, including a threatened "lockout" by owners if the players decided to end their strike, likely had a great effect on attendance at baseball games. Consider in this scenario market attendance as a measure of quantity and ticket prices as the measure of price.
-Refer to Scenario 3. Draw the supply and demand curves and explain why they have the slope they do.

Accepted Answer

@#IMG-DLM&
The demand curve slopes downward becau

Question 10

When the price of good X rises, the demand for good Y falls. Explain what this relationship implies about the two goods.

Accepted Answer

Goods X and Y must be compleme

Question 11

What relationship is shown by a supply curve?

Accepted Answer

A supply curve shows the relat

Question 12

A new medical study reports that washing your hair everyday increases the probability of baldness. Predict the effects of this report on the market for shampoo.

Accepted Answer

This will cause a decrease in

Question 13

SCENARIO 3: Events prior to the 1995 baseball season, including a threatened "lockout" by owners if the players decided to end their strike, likely had a great effect on attendance at baseball games. Consider in this scenario market attendance as a measure of quantity and ticket prices as the measure of price.
-Refer to Scenario 3. Graphically illustrate the effect of both fan dissatisfaction and shorter seasons. What effect will these changes have on price and quantity?

Accepted Answer

@#IMG-DLM&
The quantity of tickets sold will decre

Question 14

Suppose the U.S. economy enters a recession and incomes fall. What will happen to the equilibrium prices and quantities of normal goods? Would your answer be the same if you were discussing inferior goods? Why or why not?

Accepted Answer

If incomes fall, the demand for normal g

Question 15

Explain how price adjusts to eliminate excess demand.

Accepted Answer

When there is excess demand, quantity de

Question 16

Newspaper machines and soda vending machines operate very differently. The newspaper machine is a mechanical box. You place your four quarters in the machine and you open the door and low and behold there is a stack of newspapers at your disposal. Most people take one and close the door for the next patron to purchase his own copy. But notice that soda vending machines don't operate the same way. They are also mechanical but when the four quarters are inserted and a selection is made only one can of soda is available for the consumer to purchase. Explain in terms of marginal utility why these two machines are designed so differently?

Accepted Answer

The marginal utility of a second newspap

Question 17

Explain the law of diminishing marginal utility. How does it relate to the shape of the demand curve?

Accepted Answer

The law of diminishing marginal utility

Question 18

If incomes grow during the next year, what will happen in the market for RVs? (Assume that RVs are normal goods.)

Accepted Answer

If RVs are normal, an increase in income

Question 19

Using the diagram below describe the current condition of the market if the price is currently at $3.00 and what will be necessary for the market to return to equilibrium.

Accepted Answer

At a price of $3.00 the market is experi

Question 20

The market for restaurant pizza in Chicago is currently in equilibrium at a price of $8
and 2,000 pizzas are sold each day. Explain what will happen to the equilibrium price and quantity of pizzas sold and why (which curve has changed) for each of the following situations:
(a.) Delivery personnel form a labor union and secure a higher wage of $7.50 per hour (a large increase in their wage).
(b.) Fast-food hamburger restaurants (Burger King & McDonalds) cut their prices in half.

Accepted Answer

(a.) The increase in wage will lead to a

In what ways can expectations change your demand for a product today?

What types of things are sold in input or factor markets? Who are the buyers and sellers in these markets?

Homebuilders will often pay the closing costs (title, insurance, etc.) of prospective homebuyers? Explain in terms of supply and demand what homebuilders are trying to do with this practice.

Comment on the following statement: "A decrease in supply will lead to an increase in the price which decreases demand, thus lowering price. Therefore, a decrease in supply has no effect on the price of a good."

Compare and contrast the concepts of income and wealth. Are these measured as a stock or a flow? Explain.

Explain the difference between a change in demand and a change in quantity demanded.

Even though household have wide-ranging preferences, discuss some of the things that all households have in common including their constraints.

Explain how an increase in the price of leather brought about by shift in tastes may lead to an increase in the supply of beef.

When the price of good X rises, the demand for good Y falls. Explain what this relationship implies about the two goods.

What relationship is shown by a supply curve?

A new medical study reports that washing your hair everyday increases the probability of baldness. Predict the effects of this report on the market for shampoo.

Suppose the U.S. economy enters a recession and incomes fall. What will happen to the equilibrium prices and quantities of normal goods? Would your answer be the same if you were discussing inferior goods? Why or why not?

Explain how price adjusts to eliminate excess demand.

Explain the law of diminishing marginal utility. How does it relate to the shape of the demand curve?

If incomes grow during the next year, what will happen in the market for RVs? (Assume that RVs are normal goods.)

Using the diagram below describe the current condition of the market if the price is currently at $3.00 and what will be necessary for the market to return to equilibrium.

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand and Supply Applications

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

The Money Supply and the Federal Reserve System

Money Demand and the Equilibrium Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Costs Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade, Comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing and Transitional Economies

Filters

Exam 3: Demand, Supply, and Market Equilibrium

In what ways can expectations change your demand for a product today?

What types of things are sold in input or factor markets? Who are the buyers and sellers in these markets?

Homebuilders will often pay the closing costs (title, insurance, etc.) of prospective homebuyers? Explain in terms of supply and demand what homebuilders are trying to do with this practice.

Comment on the following statement: "A decrease in supply will lead to an increase in the price which decreases demand, thus lowering price. Therefore, a decrease in supply has no effect on the price of a good."

Compare and contrast the concepts of income and wealth. Are these measured as a stock or a flow? Explain.

Explain the difference between a change in demand and a change in quantity demanded.

Even though household have wide-ranging preferences, discuss some of the things that all households have in common including their constraints.

Explain how an increase in the price of leather brought about by shift in tastes may lead to an increase in the supply of beef.

When the price of good X rises, the demand for good Y falls. Explain what this relationship implies about the two goods.

What relationship is shown by a supply curve?

A new medical study reports that washing your hair everyday increases the probability of baldness. Predict the effects of this report on the market for shampoo.

Suppose the U.S. economy enters a recession and incomes fall. What will happen to the equilibrium prices and quantities of normal goods? Would your answer be the same if you were discussing inferior goods? Why or why not?

Explain how price adjusts to eliminate excess demand.

Explain the law of diminishing marginal utility. How does it relate to the shape of the demand curve?

If incomes grow during the next year, what will happen in the market for RVs? (Assume that RVs are normal goods.)

Using the diagram below describe the current condition of the market if the price is currently at $3.00 and what will be necessary for the market to return to equilibrium.

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand and Supply Applications

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

The Money Supply and the Federal Reserve System

Money Demand and the Equilibrium Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Costs Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade, Comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing and Transitional Economies

Filters