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

Figure 3.2 -Refer to Figure 3.2.A decrease in the price of the product would be represented by a movement from:

The law of demand implies, holding everything else constant, that as the price of lemonade________.

Figure 3.2 -Refer to Figure 3.2.An increase in the price of substitutes in production would be represented by a movement from:

Suppose that when the price of hamburgers decreases, the Ruiz family increases their purchases of ketchup.To the Ruiz family,

If the demand curve for a product shifts to the left and the supply curve for the product shifts to the left, the equilibrium quantity will decrease.

In each of the following situations, list what will happen to the equilibrium price and the equilibrium quantity for a particular product, which is a normal good. a.The population increases and the price of inputs increase. b.The price of a complement increases and technology advances. c.The number of firms in the market increases and income increases. d.Price is expected to increase in the future. e.Consumer preference increases and the price of a substitute in production decreases. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Figure 3.8 -Refer to Figure 3.8.The graph in this figure illustrates an initial competitive equilibrium in the market for sugar at the intersection of D₁ and S₁ (point A). If there is an increase in the price of fertilizer used on sugar cane and there is a decrease in tastes for sugar-sweetened soft drinks, how will the equilibrium point change?

'Because chips and salsa are complements, an increase in the price of chips will cause the demand for salsa to decrease.This initial shift in demand for chips results in a higher price for chips; this higher price will cause the demand curve for chips to shift to the right.' Which of the following correctly comments on this statement?

Figure 3.7 -Refer to Figure 3.7.Assume that the graphs in this figure represent the demand and supply curves for children's clothing.Which panel best describes what happens in this market when the wages of seamstresses rise?

If bottled water is considered substitutes for soda, the decline in the price of bottled water would, all else equal,

Orange juice drinkers want to consume more orange juice at a lower price.Which of the following events would have this effect?

Blu-ray players were introduced to the market in 2006, and new technology has allowed for the cost of manufacturing the players to decline significantly since the initial introduction.How did this change in technology affect the market for Blu-ray players?

Which of the following would cause an increase in the equilibrium price and an increase in the equilibrium quantity of watermelons?

If the demand for a product increases and the supply of the same product increases, the equilibrium price will increase.

Danielle Ocean pays for monthly pool maintenance for her home swimming pool.Last week the owner of the pool service informed Danielle that he must raise his monthly service fee because of increases in the price of pool chemicals.How is the market for pool maintenance services affected by this?

When the price of a good falls, consumers buy a larger quantity because of the ________ effect and the ________ effect.

Western Vineyards can grow either red wine grapes or white wine grapes on their land.Which of the following would cause the supply of red wine grapes to decrease?

If a firm has an incentive to increase supply now and decrease supply in the future, the firm expects that the________.

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

Which of the following is evidence of a surplus of bananas?