Exam 3: Where Prices Come From: The Interaction of Demand and Supply

Discuss the correct and incorrect economic analysis in the following statements. "If a disease kills a large number of turkeys,the supply of turkeys will decrease.This will result in a price increase,which will then cause the supply of turkeys to increase."

At market equilibrium,

Figure 3-5 -Refer to Figure 3-5.At a price of $15,the quantity sold

What is a surplus? What is a shortage?

The growing popularity of energy conservation has enticed large home improvement stores like Home Depot and Lowes to offer tankless water heaters.How does the fact that home improvement stores now offer these products affect the tankless water heater market?

A decrease in the price of pork will result in

The substitution effect of a price change refers to

The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in the price of a substitute product.

For each of the following pairs of products,state which are complements,which are substitutes,and which are unrelated. a.House plants and potato chips b.Eyeglasses and contact lenses c.Motorcycles and gasoline d.Smartphones and smartphone apps e.Red wine and white wine

Figure 3-8 -Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D₁ and S₂ (point B). Assume that Motorcycles are a normal good. If there is an increase in number of companies producing motorcycles and a decrease in income (assume motorcycles are a normal good), the equilibrium could move to which point?

Figure 3-8 -Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D₂ and S₂ (point E). If the technology to produce motorcycles improves and the number of buyers increases, how will the equilibrium point change?

Which of the following would cause both the equilibrium price and equilibrium quantity of oysters (assume that oysters are a normal good)to decrease?

If a decrease in income leads to a decrease in the demand for ice cream,then ice cream is

A competitive market equilibrium is a market equilibrium with many buyers and sellers.