Exam 4: The Market Forces of Supply and Demand

Market demand is given as Qd = 400 - 2P. Market supply is given as Qs = 3P + 100. What would result if the market price were $80?

What do demand and supply determine in a perfectly competitive market?

Who ultimately determines the demand for a product or service?

When economists are interested in how markets work, what do they most often work with?

Which of the following demonstrates the law of demand?

Figure 4-7 -Refer to the Figure 4-7. What would cause the movement from point B to point A on the graph?

If goods A and B are complements, what will result from an increase in the price of A?

The law of supply states that, other things equal, when the price of a good rises, the quantity supplied of the good falls.

If the price of a substitute to good X increases, what will happen?

Who or what allocates an economy's scarce resources?

If the demand for a good falls when income falls, the good is called an inferior good.

-Refer to the Table 4-2. What is the space that would represent an increase in equilibrium quantity and an indeterminate change in equilibrium price?

What is an example of a perfectly competitive market?

What is an example of substitute goods?

Other things equal, what happens when the price of a good rises?

If a study by the CMA found that brown sugar caused weight gain while white sugar caused weight loss, what would we see?

Figure 4-5 -Refer to the Figure 4-5. Which of the four graphs shown illustrates a decrease in quantity demanded?

If the supply of a product increases, what would we expect?

Market demand is given as Qd = 95 - P. Market supply is given as Qs = 3P + 15. What would result if the market price were $10?

Suppose the equation Qd=(10-0.4D)-0.6P describes an individual's demand for iTunes content, with D being the price of the device needed to access iTunes content, in $100s. a) Draw the individual demand curve and show a person's quantity demanded when the price P is $8 and the price of the device is $600 (D=6). b) If the market price P increased by $1 (so that the new price is P=$9), what should be the change in the price of the device (D) that would keep the quantity demanded the same as before? Show these changes in a graph. c) For the above question (b), identify which change(s) have determined a movement along the demand curve, and which have determined a shift in the demand curve.