Exam 4: Supply and Demand: an Initial Look

Figure 4-3 -A 1985 Harvard study showed that the price of cigarettes does not affect how much an individual smokes but whether he smokes.If this is correct, which graph in Figure 4-3 shows the typical individual's demand curve for cigarettes?

Any factor that shifts the supply curve inward and to the left and does not affect the demand curve will raise the equilibrium price and reduce the equilibrium quantity.

How will a decrease in price tend to affect supply?

When used in a professional or technical sense, the law of supply and demand refers to

Consumers expressed outrage at the high price of chainsaws after Hurricane Andrew hit Florida and Louisiana, with newspaper editorials accusing suppliers of unconscionable price gouging.Use a supply and demand graph to assist in explaining the increase in the price of chain saws after Hurricane Andrew.

Any change that shifts the supply curve outward to the right, and does not affect ​the demand durve will lower the equilibrium price and raise the equilibrium.

Legal limits on prices will tend to cause misallocation of resources because

Figure 4-16 -Assume that Figure 4-16 shows the supply of orange juice.A decrease in the wage rate paid to workers in the orange juice industry will shift supply from

Suppose the numbers in parentheses represent two points on a line: (59 billion quarts; $4) and (78 billion quarts; $6).The line is most likely a

At equilibrium, the market will clear, with no surpluses or shortages occurring.

When GM advertises its cars, the company is trying to cause a

A change in the income of buyers will normally change demand.

Distinguish between scarcity and shortage.

Price floors are typically accompanied by a standard series of symptoms.What are they?

The most basic investigative tool of economics is the

Which of the following is an example of a price floor?

The quantity of Blu-Ray players purchased declined in spite of a decline in price.This implies that the

Some medical authorities announced in the late 1980s that an acne medicine named Retin-A also had previously unknown wrinkle-reducing properties.An economist would expect to find that, after this announcement, the price of Retin-A ____ and the quantity sold ____.

Why do price ceilings tend to cause persistent imbalances in the market?

An increase in price will increase supply.