Exam 3: Demand, Supply, and Market Equilibrium

The following are some changes that may take place in the market for textbooks. For each of the following, indicate what will happen to either the demand for or the supply of textbooks by listing which curve is affected and then the terms: "shift right or "shift left". (a.) An increase in student enrollment at universities across the country. (b.) A decrease in the price of ink used to print textbooks. (c.) A drop in income (textbooks are a normal good). (d.) An improvement in the technology used to print textbooks. (e.) An increase in college tuition.

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

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

Explain the law of supply. What does the law of supply imply about the shape of the supply curve?

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.

Draw a supply curve for a hypothetical firm and explain the relationship.

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.

Show graphically (in two separate graphs) the effects of an increase in the price of peanut butter on the demand for peanut butter and on the demand for jelly.

Suppose there is news that indicates that gasoline supplies might suddenly become disrupted by a truckers' union strike. What would you expect would happen to the demand for gasoline in the present? How might consumers change their behavior and why? What impact would this news have on the price of gasoline immediately? Would it matter whether the news story was accurate?

Explain how price expectations can affect the supply of a product.

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

A supermarket manager discovers that his generic brand beans are disappearing off of his shelves faster than he can restock them and the premium brand beans are staying on the shelf going unsold. What can we probably say about the current prices of each of these products in relation to the market-clearing price?