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

Technological advances have resulted in lower prices for digital cameras.What is the impact of this on the market for traditional (non-digital)cameras?

(Multiple Choice)

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Question 121

For each of the following pairs of products, state which are complements, which are substitutes, and which are unrelated. a.Blu-ray discs and video-on-demand b.Fiat 500 and Mini Cooper S c.Toothpaste and toothbrush d.Popcorn and snowboards e.Razors and razor blades _ _

(Essay)

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Question 122

Figure 3.7 -Refer to Figure 3.7.Assume that the graphs in this figure represent the demand and supply curves for bicycle helmets.Which panel best describes what happens in this market if there is a substantial increase in the price of bicycles?

(Multiple Choice)

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Question 123

A movement along the demand curve for toothpaste would be caused by:

(Multiple Choice)

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Question 124

Suppose a negative technological change in the production of disease-resistant wheat caused the price of wheat to rise.Holding everything else constant, how would this affect the market for corn (a substitute for wheat)?

(Multiple Choice)

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Question 125

Figure 3.3 -Refer to Figure 3.3.The figure above shows the supply and demand curves for two markets: the market for original Picasso paintings and the market for designer jeans.Which graph most likely represents which market?

(Multiple Choice)

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Question 126

A normal good is a good for which the demand increases as income decreases, holding everything else constant.

(True/False)

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Question 127

The income effect of a price change refers to the impact of a change in:

(Multiple Choice)

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Question 128

If, in the market for oranges, the supply has increased then________.

(Multiple Choice)

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Question 129

Assume that the hourly price for the services of tarot card readers has risen and sales of these services have also risen.One can conclude that________.

(Multiple Choice)

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Question 130

Figure 3.1 -Refer to Figure 3.1.A decrease in the price of a complementary good would be represented by a movement from:

(Multiple Choice)

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Question 131

Harvey Rabbitt pays for monthly cable TV service.Last week the cable company informed Harvey that his monthly cable price would go down because the city council has granted approval for three new cable companies to service his area.How is the market for cable TV services affected by this?

(Multiple Choice)

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Question 132

The substitution effect explains why there is a direct relationship between the price of a product and the quantity of the product demanded.

(True/False)

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Question 133

As the number of firms in a market decreases, the supply curve will shift to the left and the equilibrium price will rise.

(True/False)

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Question 134

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 a shortage of apples how will the equilibrium point change?

(Multiple Choice)

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Question 135

Explain how it would be possible for the equilibrium price and equilibrium quantity to both increase in the market for motorcycles if consumer preference for motorcycles increases and the number of motorcycle manufacturers decreases. _ _

(Essay)

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Question 136

What would happen in the market for laser eye surgery if insurance companies started to cover a portion of the price of voluntary procedures?

(Multiple Choice)

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Question 137

If consumers believe the price of MP3 players will decrease in the future, this will cause the demand for MP3 players to increase now.

(True/False)

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Question 138

If a decrease in income leads to in a decrease in the demand for pizza, then pizza is:

(Multiple Choice)

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Question 139

Holding everything else constant, an increase in the price of MP3 players will result in:

(Multiple Choice)

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Question 140

Technological advances have resulted in lower prices for digital cameras.What is the impact of this on the market for traditional (non-digital)cameras?

For each of the following pairs of products, state which are complements, which are substitutes, and which are unrelated. a.Blu-ray discs and video-on-demand b.Fiat 500 and Mini Cooper S c.Toothpaste and toothbrush d.Popcorn and snowboards e.Razors and razor blades _ _

Figure 3.7 -Refer to Figure 3.7.Assume that the graphs in this figure represent the demand and supply curves for bicycle helmets.Which panel best describes what happens in this market if there is a substantial increase in the price of bicycles?

A movement along the demand curve for toothpaste would be caused by:

Suppose a negative technological change in the production of disease-resistant wheat caused the price of wheat to rise.Holding everything else constant, how would this affect the market for corn (a substitute for wheat)?

Figure 3.3 -Refer to Figure 3.3.The figure above shows the supply and demand curves for two markets: the market for original Picasso paintings and the market for designer jeans.Which graph most likely represents which market?

A normal good is a good for which the demand increases as income decreases, holding everything else constant.

The income effect of a price change refers to the impact of a change in:

If, in the market for oranges, the supply has increased then________.

Assume that the hourly price for the services of tarot card readers has risen and sales of these services have also risen.One can conclude that________.

Figure 3.1 -Refer to Figure 3.1.A decrease in the price of a complementary good would be represented by a movement from:

Harvey Rabbitt pays for monthly cable TV service.Last week the cable company informed Harvey that his monthly cable price would go down because the city council has granted approval for three new cable companies to service his area.How is the market for cable TV services affected by this?

The substitution effect explains why there is a direct relationship between the price of a product and the quantity of the product demanded.

As the number of firms in a market decreases, the supply curve will shift to the left and the equilibrium price will rise.

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 a shortage of apples how will the equilibrium point change?

Explain how it would be possible for the equilibrium price and equilibrium quantity to both increase in the market for motorcycles if consumer preference for motorcycles increases and the number of motorcycle manufacturers decreases. _ _

What would happen in the market for laser eye surgery if insurance companies started to cover a portion of the price of voluntary procedures?

If consumers believe the price of MP3 players will decrease in the future, this will cause the demand for MP3 players to increase now.

If a decrease in income leads to in a decrease in the demand for pizza, then pizza is:

Holding everything else constant, an increase in the price of MP3 players will result in:

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition: The Competitive Model in a More Realistic

Oligopoly: Markets With Few Competitors

The Markets for Labour and Other Factors of Production

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

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

Technological advances have resulted in lower prices for digital cameras.What is the impact of this on the market for traditional (non-digital)cameras?

Figure 3.7 -Refer to Figure 3.7.Assume that the graphs in this figure represent the demand and supply curves for bicycle helmets.Which panel best describes what happens in this market if there is a substantial increase in the price of bicycles?

A movement along the demand curve for toothpaste would be caused by:

Suppose a negative technological change in the production of disease-resistant wheat caused the price of wheat to rise.Holding everything else constant, how would this affect the market for corn (a substitute for wheat)?

Figure 3.3 -Refer to Figure 3.3.The figure above shows the supply and demand curves for two markets: the market for original Picasso paintings and the market for designer jeans.Which graph most likely represents which market?

A normal good is a good for which the demand increases as income decreases, holding everything else constant.

The income effect of a price change refers to the impact of a change in:

If, in the market for oranges, the supply has increased then________.

Assume that the hourly price for the services of tarot card readers has risen and sales of these services have also risen.One can conclude that________.

Figure 3.1 -Refer to Figure 3.1.A decrease in the price of a complementary good would be represented by a movement from:

Harvey Rabbitt pays for monthly cable TV service.Last week the cable company informed Harvey that his monthly cable price would go down because the city council has granted approval for three new cable companies to service his area.How is the market for cable TV services affected by this?

The substitution effect explains why there is a direct relationship between the price of a product and the quantity of the product demanded.

As the number of firms in a market decreases, the supply curve will shift to the left and the equilibrium price will rise.

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 a shortage of apples how will the equilibrium point change?

What would happen in the market for laser eye surgery if insurance companies started to cover a portion of the price of voluntary procedures?

If consumers believe the price of MP3 players will decrease in the future, this will cause the demand for MP3 players to increase now.

If a decrease in income leads to in a decrease in the demand for pizza, then pizza is:

Holding everything else constant, an increase in the price of MP3 players will result in:

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition: The Competitive Model in a More Realistic

Oligopoly: Markets With Few Competitors

The Markets for Labour and Other Factors of Production

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

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 a shortage of apples how will the equilibrium point change?