Exam 4: Bringing Supply and Demand Together

FIGURE 4-4 -Refer to Figure 4-4. Starting with initial curves D₀ and S₀, which movement is consistent with a decrease in both demand and supply?

TABLE 4-2 -Refer to Table 4-2. Suppose that D₁ and S₂ are the demand and supply schedules for Product A. What will be the result if the government imposes a price ceiling of $6?

TABLE 4-2 -Refer to Table 4-2. Suppose that D₁ and S₁ are the prevailing demand and supply curves for a product. What happens in the market if the demand schedule changes from D₁ to D₂?

If market demand decreases and market supply increases, what will happen to the equilibrium quantity and equilibrium price?

What is occurring in the market when there is an excess quantity supplied of a product at the current price?

The main purpose of government price controls is to keep prices at equilibrium levels.

A shortage exists in the market for corn at the prevailing price. What will eliminate the shortage?

FIGURE 4-3 -Refer to Figure 4-3. Starting with initial curves D₀ and S₀, which movement is consistent with a strike by the Basque Shepherds Guild?

After a cruise ship is hijacked at sea by terrorists, fearful consumers seek to take their vacations on land. At the same time, cruise employees demand and receive higher wages. What is the effect on the market for cruise vacations?

TABLE 4-4 -Refer to Table 4-4. If the government were to remove a $1.20 price floor in the milk market, what would be the result?

In an effort to fight inflation of 18 percent per year in Venezuela, President Hugo Chávez has instituted price controls on most basic foodstuffs. Which of the following is the likely outcome of these price controls?

Good A (an inferior good) and Good B (a normal good) are viewed by consumers to be substitute products. Suppose that the price of Good B falls at the same time that consumer income increases. What is the net effect of these two events on equilibrium in the market for Good A?

Markets tend toward equilibrium and, as a result, will tend to eliminate shortages and surpluses. Why?

TABLE 4-2 -Refer to Table 4-2. If D₁ and S₁ represent the demand and supply schedules in a particular market, then what are the equilibrium price and quantity in that market?

The diagram below represents the market for butter. FIGURE 4-1 -Refer to Figure 4-1. If the current price of butter equals $5, what is the result in the market?

If the market for Rolex watches is in equilibrium, the quantity of watches demanded will equal the quantity of watches supplied.

Reuters News Service reports: "Canadian automobile sales tumbled 15 percent in March (2009)." Which of the following would explain this sales drop?

FIGURE 4-2 -Refer to Figure 4-2. Which movement of equilibrium illustrates a decrease in the quantity demanded, but NOT a decrease in demand?

FIGURE 4-5 -Refer to Figure 4-5. What is occurring in the market for gasoline?

Which action will always result in a shortage?