Exam 4: The Market Forces of Supply and Demand

If a market exists anywhere, it will be perfectly competitive.

A leftward shift of a product supply curve might be caused by:

In a perfectly competitive market, sellers are price setters while buyers are price takers.

Graph 4-6 -Refer to the Graph 4-6. In this market, equilibrium price and quantity would be:

Graph 4-5 -Refer to Graph 4-5. According to the graph, at a price of $7:

If demand increases and supply simultaneously decreases, equilibrium price will rise.

In a free market system, what is the mechanism for rationing scarce resources?

Suppose that the World Health Organiszation announces that men who shave their legs are less likely to die of heart failure. We could expect the:

Suppose we are analysing the market for hot chocolate. What will be the impact on the equilibrium price and quantity of each of the following events affecting the hot chocolate market? a. winter starts and the weather turns sharply colder b. the price of coffee falls c. the price of whipped cream falls d. the price of cocoa beans increases e. consumer income falls because of a recession f. the Health Department of Australia announces that hot chocolate cures acne g. the population increases h. a better method of harvesting cocoa beans is introduced

The market-clearing price will always be lower than the equilibrium price.

Based on economic theory, anyone willing to pay the market price for a resource may have it.

Surpluses drive price up, whereas shortages drive price down.

At the equilibrium price:

In addition to price, the determinants of individual supply include input prices, technology and expectations.

An increase in the price of a product will reduce the amount of it purchased because:

Improvements in technology is demonstrated by a shift in the supply curve.

The market demand is the average of all of the individual demands for a particular good or service.

Given the following table for 19-inch colour TVs, graph both the demand and supply curves. Label the equilibrium price and quantity. Now assume that a TV is a normal good and income rises. Consumers are now willing and able to purchase 500 more TVs per month at every price. Show this change on your graph and explain what has happened to equilibrium price and quantity as a result.

A demand curve is:

Suppose Lee likes chicken curry a little bit more than fish and chips. Lee eats chicken curry twice as often as fish and chips. Now suppose the price of chicken rises. How would Lee's demand for fish and chips change, assuming everything else was constant?