Exam 3: A: - Demand, Supply, and Market Equilibrium

Given the products below and the events that affect them, indicate what happens to demand or supply, and the equilibrium price and quantity.Identify the determinant of demand or supply that causes the shift.(a) Blue jeans.The wearing of blue jeans becomes less fashionable among consumers.(b) Computers.Parts for making computers fall in price because of improvements in technology.(c) Lettuce.El Nino produces heavy rains that destroy a significant portion of the lettuce crop.(d) Chicken.Beef prices rise because severe winter weather reduces cattle herds.

Define "demand."

Suppose a producer sells 1,000 units of a product at $5 per unit one year, 2,000 units at $8 the next year, and 3,000 units at $10 the third year.Is this evidence that the law of demand is violated? Explain.

Suppose that a decrease in the price of feed grain leads to a dramatic decrease in the price of beef.Use the income effect and the substitution effect to explain why there was an increase in the quantity of beef purchased.

Demand is represented by the equation, P = 80 - 0.3QD and supply by the equation P = 30 + 0.2QS.(a) Determine the equilibrium price and quantity.(b) What are the economic effects of a price ceiling at $41? (c) What are the economic effects of a price ceiling at $72? (d) What are the economic effects of a price floor at $62? (e) What are the economic effects of a price floor at $37?

List six basic determinants of market supply that could cause supply to increase.

Use the data in the following table to explain the economic effects of a price ceiling at $6, at $5, and at $4.

What is the difference between a change in supply and a change in quantity supplied?

Using the schedules given, plot the demand curve and the supply curve on the below graph.Label the axes and indicate for each axis the units being used to measure price and quantity.Then answer the questions. (a) Give the equilibrium price and quantity for oats.(b) Indicate the equilibrium price and quantity on the graph by drawing lines from the intersection of the supply and demand curves to the price and quantity axes.(c) If the Federal government decided to support the price of oats at $1.40 per ton, tell whether there would be a surplus or shortage and how much it would be.(d) Demonstrate your answer to part (c) on your graph being sure to label the quantity you designated as the shortage or surplus.

(a) Using the schedules given, determine the demand equation and the supply equation. (b) What is the intercept of the demand equation? What is the slope of the demand equation? (c) What is the intercept of the supply equation? What is the slope of the supply equation? (d) What is the equilibrium price and quantity?

Give two explanations for the law of demand.

What is a price floor and what are its economic effects?

Despite a lower price for its product, the widget industry is selling fewer units.How is this possible if the law of demand has not been violated? Give and explain two distinct reasons.

Using the schedules given, plot the demand curve and the supply curve on the below graph.Label the axes and indicate for each axis the units being used to measure price and quantity.Then answer the questions. (a) Give the equilibrium price and quantity for wheat.(b) Indicate the equilibrium price and quantity on the graph by drawing lines from the intersection of the supply and demand curves to the price and quantity axes.(c) If the Federal government decided to support the price of wheat at $4.00 per ton, tell whether there would be a surplus or shortage and how much it would be.(d) Demonstrate your answer to part (c) on your graph being sure to label the quantity you designated as the shortage or surplus.

Use the data in the following table to explain the economic effects of a price floor at $6.

Define "supply."

Give examples of two substitute goods and two complementary goods.In each case explain why the goods are substitutes or complements.

What are the consequences of reduced supply of lettuce for equilibrium price and quantity?

Economist Jones defines an increase in supply as a decrease in the prices needed to ensure various amounts of a good being offered for sale.Economist Brown defines an increase in supply as an increase in the amounts that producers will offer at various possible prices.Economist Cole defines an increase in supply as an increase in the amount firms will offer in the market which is caused by an increase in the price of the product.Which, if any, of these is defining an increase in supply correctly? Explain.

What are the consequences for equilibrium price and quantity if the supply of gasoline has decreased and the demand for gasoline has increased? Assume that the increase in demand outweighs the decrease in supply.