Exam 4: Demand, Supply, and Market Equilibrium

If supply of a product increases and demand for the product decreases, equilibrium price will definitely change.

Excess demand in an unregulated market will cause the price of a product to fall.

People will buy more of an inferior good when their income decreases.

As a result of advances in technology, cellular telephones have become cheaper to produce. Illustrate the effect of this change on the market for cellular telephones.

Governments sometime create an excess supply of a product by setting a minimum price that is greater than the equilibrium price, resulting in a permanent excess supply of the product. This is known as a price ceiling.

Recall the Application about the increase in Chinese demand for pecans to answer the following question(s). Between 2006 and 2009, Chinese imports of U.S. pecans increased from 9 million pounds per year to 88 million pounds per year, and as a result of the increase in demand, the equilibrium price increased by about 50 percent. The increase in demand was caused in part by widespread reports in the Chinese media extolling the health benefits of pecans. -Recall the Application. If consumer income in China increased and as a result the demand for pecans decreased, this would indicate that in China, pecans would be considered ________ goods.

Two goods are complements if an increase in the price of one good leads to an increase in demand for the other.

A decrease in demand will cause the equilibrium price and quantity of a good to fall, ceteris paribus.

Recall the Application about the decrease in taxes on cigarettes in several Canadian provinces in 1994 to answer the following question(s). -Recall the Application. The change in demand for cigarettes resulting from the decrease in taxes would normally create, ceteris paribus,

4.4 Market Effects of Changes in Demand -Figure 4.3 illustrates the demand for tacos. Assume tacos are an inferior good. An increase in income would bring about a movement from

Suppose that there are only three consumers of a product. At a price of $6 per unit, the first consumer would buy 12 units of the product, the second consumer would buy 8 units, and the third consumer would buy 3 units of the product. If you drew a market demand curve for this product, the quantity demanded at a price of $6 would be

4.4 Market Effects of Changes in Demand -Figure 4.3 illustrates the demand for tacos. Assume that tacos and beer are complements. An increase in the price of beer would bring about a movement from

Table 4.1 Quantity of Frozen Latte-On-A-Stick Supplied -Refer to Table 4.1, which shows Flo's and Rita's individual supply schedules for frozen latte-on-a-stick. Assuming Flo and Rita are the only suppliers in the market, what is the market quantity supplied at a price of $1?

Recall the Application about the decline in honeybee colonies and its effect on the price of ice cream to answer the following question(s). In the last few years thousands of honeybee colonies have vanished, a result of bee colony collapse disorder (CCD). Roughly one third of the U.S. food supply--including a wide variety of fruits, vegetables, and nuts--depends on pollination from bees. The decline of honeybees threatens $15 billion worth of crops in the United States. -According to this Application, the decline in honeybee colonies and its subsequent effect on the ingredients used in the production of ice cream has ________ the equilibrium price and ________ the equilibrium quantity of ice cream.

On the "supply side" of a market, producers indicate to consumers what they are willing to sell, in what quantity and at what price.

When there is a change in the quantity demanded it means that

4.4 Market Effects of Changes in Demand -Figure 4.3 illustrates the demand for tacos. A decrease in price of tacos would bring about a movement from

Recall the Application about the decrease in price of illegal drugs in the United States to answer the following question(s). -Recall the Application. If the decrease in price of illegal drugs is primarily due to a change in supply, the equilibrium quantity of drugs

Explain what would happen to the equilibrium price and quantity of gasoline if the supply of gasoline decreased while the demand for gasoline also decreased.

4.3 Market Equilibrium: Bringing Demand and Supply Together -Figure 4.2 illustrates the supply and demand for t-shirts. If the actual price of t-shirts is $7, we would expect that