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

Figure 3.7 -Refer to Figure 3.7.Assume that the graphs in this figure represent the demand and supply curves for rice.What happens in this market if buyers expect the price of rice to fall?

Figure 3.1 -Refer to Figure 3.1.Which movement reflects a decrease in the price of a substitute good?

Figure 3.8 -Refer to Figure 3.8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D₂ and S₁ (point C). Which of the following changes would cause the equilibrium to change to point B?

A shortage occurs when the market price is lower than the equilibrium price.

If an increase in income leads to in an increase in the demand for peanut butter, then peanut butter is:

Figure 3.2 -Refer to Figure 3.2.A decrease in productivity would be represented by a movement from:

What are the two effects that explain the Law of Demand? Briefly explain each effect. _____________________________________________________________________________________________ _____________________________________________________________________________________________

An increase in the price of off-road vehicles will result in:

If an increase in income leads to a decrease in the demand for popcorn, then popcorn is:

All else equal, the decrease in consumer preference predicted by Apple for its iPhone 5 would be represented by a________.

Studies have shown links between calcium consumption and a reduction in osteoporosis.How does this affect the market for calcium?

Figure 3.8 -Refer to Figure 3.8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D₁ and S₁ (point A). If there is an increase in the wages of apple workers and an increase in the price of oranges, a substitute for apples, the equilibrium could move to which point?

Figure 3.4 -Refer to Figure 3.4.What occurs if the price is $10?

A positive technological change will cause the supply of a good to increase.

What is the law of supply? What does this law imply about the shape of the supply curve? _____________________________________________________________________________________________ _____________________________________________________________________________________________

A decrease in the demand for soft drinks due to changes in consumer tastes, accompanied by an increase in the supply of soft drinks as a result of reductions in input prices, will result in:

If, in response to a decrease in the price of grapes, the quantity of grapes demanded increases, economists would describe this as:

Assume that the demand curve for MP3 players shifts to the right and the supply curve for MP3 players shift to the left, but the supply curve shifts more than the demand curve.As a result,

An increase in the price of inputs will cause the supply curve for a product to shift to the right.

When deciding on which new products to develop, a firm must devote people, time, and money to designing a new product.Because any firm has only limited resources, it________.