Exam 4: Supply and Demand: an Initial Look

Figure 4-14 -Frustrated by the cost and ineffectiveness of the war on drugs, the U.S.government could consider "decriminalization" of the use and sale of cocaine.Critics contend that lower prices will expand drug use and that decriminalization will remove the stigma and danger from arrest associated with drug use, thus further increasing the demand and number of addicts.Which graph in Figure 4-14 best illustrates the critics' case?

What is the economic reasoning behind the proposal to legalize drugs?

Price controls are usually enacted in response to

At an equilibrium price, quantity demanded

Demand shifts due to changes in price.

Which of the following is the correct way to describe equilibrium in a market?

Exhibit 4-1 The following are the equations for the supply and demand curves in the market for weezils: where Q_d is the quantity demanded, Q_s is the quantity supplied, and P is the price per weezil in dollars. -Refer to Exhibit 4-1.If consumers decide that they want 20 percent fewer weezils at every price, the equation for the new demand curve for weezils will be

Explain the effect of the following changes on equilibrium price and quantity of a commodity:(a)increase in average incomes.(b)increase in population.

Producers were accused of price gouging as the price of bottled water soared after Hurricane Andrew.Consumers clamored for price controls to keep bottled water at pre-Andrew levels.Use supply and demand analysis to graphically show the effect of setting a price ceiling on bottled water after Hurricane Andrew at the pre-hurricane equilibrium price.Use your graph to assist in explaining the likely unintended effects of such a price control.Be sure that your graph is completely and correctly labeled.

Ticket "scalping" is an example of

From 2007 to 2008, the Federal Reserve System reduced interest rates, the price that borrowers pay.As a result, economists expected that the supply of money would

Price ceilings will likely

A supply curve slopes upward because quantity supplied is higher when price is higher.

Change in the price of a good causes the demand schedule for that good to shift.

One effect of market intervention is resource misallocation.

Figure 4-21 -Which price in Figure 4-21 is equilibrium?

Scarcity and choice are the basic problems of economics; the supply and demand mechanism is the basic investigative tool of economics.

The position of a demand curve is unaffected by changes in the price of the good.

A shift in the demand curve for sailboats resulting from an increase in incomes will lead to

If demand increases, the equilibrium price and equilibrium quantity will both fall, everything else being equal.