Exam 3: Demand, Supply, and Market Equilibrium

SCENARIO 3: Events prior to the 1995 baseball season, including a threatened "lockout" by owners if the players decided to end their strike, likely had a great effect on attendance at baseball games. Consider in this scenario market attendance as a measure of quantity and ticket prices as the measure of price. -Refer to Scenario 3. Graphically illustrate the effect of a shortened season. What effect will this have on the price and quantity of tickets sold?

Using the diagram below explain why it the market is in disequilibrium at a price of $1.75 and the process that will be necessary to restore it.

The table below shows the supply and demand for pencils: (a.) What is the equilibrium price and quantity? How can you tell? (b.) Suppose the current price is $0.20. What situation is present? Will the price remain at $0.20? Why or why not?

The figure below shows the market for cotton fabric: (a.) If the price in the market is $8.00, would the market be at equilibrium? If not, is there a shortage or a surplus? How large is the shortage or surplus? (b.) If the price in the market is $5.00, would the market be at equilibrium? If not, is there a shortage or a surplus? How large is the shortage or surplus? (c.) If the price in the market is $2.00, would the market be at equilibrium? If not, is there a shortage or a surplus? How large is the shortage or surplus?

Explain how the market demand curve can be derived. Does the law of demand apply to the market demand curve?

SCENARIO 3: Events prior to the 1995 baseball season, including a threatened "lockout" by owners if the players decided to end their strike, likely had a great effect on attendance at baseball games. Consider in this scenario market attendance as a measure of quantity and ticket prices as the measure of price. -Refer to Scenario 3. Graphically illustrate the effect of dissatisfaction with the team by fans. What effect does this have on the price and quantity of tickets sold?

The figure below shows the market for macaroni: (a.) What is the equilibrium price and quantity? (b.) At what price shown on the graph would there be an excess demand for macaroni? What would be the size of this excess demand? (c.) At what price shown on the graph would there be an excess supply of macaroni? What would be the size of this excess supply?

Explain how the input and output markets are connected.

List three characteristics of demand curves. Make sure to explain the shape of the curve and the meaning of the vertical and horizontal intercepts.

If the price of apples decreases, what is the likely effect on the market for peaches?

Explain what is meant by excess demand or s shortage.

When the price of compact disc players decreases, the demand for compact discs rises while the demand for cassette tapes decreases. What does this imply about the relationship between compact disc players, compact discs, and cassette tapes?

Most goods and service that we enjoy are bought and sold in the market. However, leisure is something that we value but we do not buy it explicitly. What is the price of leisure? Explain what would happen to the amount of leisure that we would enjoy if the wage rate went up. Make sure to use the substitution and income effect to explain your answer and postulate whether leisure is a normal or inferior good. Why is the ultimate net effect not determinable by appealing to logic alone?

When the price of good X rises, the demand for good Y rises. Explain what this relationship implies about the two goods.

Explain what an entrepreneur is and its function.

Suppose a long lost relative died and left you a trust fund worth $1 million that you will receive ten years from now. What effect, if any, will this have on your demand for airline travel? (Assume that airline travel is a normal good.)

Suppose the price of copper and the quantity of copper both rose at the same time. What might be the likely explanation of this using supply and demand analysis?

Explain the difference between a change in supply and a change in quantity supplied.

You attend a rock concert and notice that there are hundreds of empty seats. What might you conclude about the market price of the concert ticket?

Some baseball parks have a "7th Inning Stretch" where beer, hotdogs and other food items are offered for sale at a lower price. What economic concept is being used by the baseball park to justify this practice? If it is successful at selling more food and drink with this practice why don't they lower prices at the beginning of the game?