Unit 2 Review Answer Key

Transcription

1 1.) A demand schedule is a table that shows the various quantities demanded relative to a given price. A demand curve is a graphical representation of the demand schedule. 2.) a. consumer 3.) willing and able 4.) If price increases, then quantity demanded decreases. If price decreases, then quantity demanded increases. 5.) 6.) a. willing and able, more at all a. willing and able, less at all 7.) 8.) 9.) B 10.) C 11.) C a. change in price a. No 12.) "...if price rises, then demand will fall." If price rises, then QUANTITY demanded will fall. "...if price falls, demand will rise " If price falls, QUANTITY demanded will rise.

2 13.) a. c. d. The quantity of umbrellas demanded is higher at given price on a rainy day than on a dry day. This is a rightward shift of the demand curve, since at any given price the quantity demanded rises. This implies that any specific quantity can now be sold at a higher price. The quantity of weekend calls demanded rises in response to a price reduction. This is a movement along the demand curve for weekend calls. The demand for roses increases the week of Valentine's Day. This is a rightward shift of the demand curve. The quantity of gasoline demanded falls in response to a rise in price. This is a movement along the demand curve. 14.) 15.) If price increases, then quantity supplied increases. If price decreases, then quantity supplied decreases. a. producer 16.) 17.) a. more at all a. less at all 18.) 19.) 20.) A 21.) D a. change in price a. No

3 22.) a. c. d. e. The quantity of houses supplied rises as a result of an increase in prices. This is a movement along the supply curve. The quantity of strawberries supplied is higher at any given price. This is an increase in supply, which shifts the supply curve to the right. The quantity of labor supplied is lower at any given wage. This is a decrease in supply, which shifts the supply curve leftward compared to the supply curve during school vacation. So, in order to attract workers, fast-food chains have to offer higher wages. The quantity of labor supplied rises in response to a rise in wages. This is a movement along the supply curve. The quantity of cabins supplied is higher at any given price. This is an increase in supply, which shifts the supply curve to the right. Are the following a determinant of demand or supply? 23.) Demand 24.) Supply 25.) Supply 26.) Demand 27.) Demand 28.) Demand 29.) Supply 30.) Supply 31.) Demand 32.) Supply 33.) Supply 34.) 35.) No, equilibrium is a temporary condition. But, a free market always moves towards equilibrium. 36.) a. c. This is an increase in supply, so the supply curve shifts rightward. At the original equilibrium price of the year before, the quantity of grapes supplied exceeds the quantity demanded, and the result is a surplus. The price of grapes will fall. This is a decrease in demand, so the demand curve shifts leftward. At the original equilibrium price, the quantity of hotel rooms supplied exceeds the quantity demanded. The result is a surplus. The rates for hotel rooms will fall. Demand increases, so the demand curve for second-hand snow blowers shifts rightward. At the original equilibrium price, the quantity of second-hand snow blowers demanded exceeds the quantity supplied. This is a case of shortage. The equilibrium price of second-hand snow blowers will rise.

4 For questions draw a demand and supply curve for beef consumption in the month of May. Based on the information given, shift the appropriate curve and indicate what happens to market price and quantity. 37.) Consumers expect price of Beef to Rise in June: Determinant: Change in consumer expectations 38.) Millions of immigrants swell U.S. population: Determinant: Change in number of consumers 39.) Pork prices drop: Determinant: Change in the price of a related good (substitute) 40.) Surgeon general warns that eating beef is hazardous to health: Determinant: Change in tastes or preferences 41.) Beef prices fall; consumers buy more: Determinant: None, but only possible with an increase in supply

5 42.) Real income for U.S. drops for third month: Determinant: Change in consumer income 43.) Charcoal shortage threatens Memorial Day cookouts: Determinant: Change in the price of a related good (complement) 44.) Nationwide fad - The Disco Burger: Determinant: Change in tastes or preferences For questions draw a demand and supply curve for the automobile market (foreign and domestic). Based on the information given, shift the appropriate curve and indicate what happens to market price and quantity. Finally write the determinant, if any. 45.) Auto workers' union agrees to wage cuts: Determinant: Change in input prices

6 For questions draw a demand and supply curve for the automobile market (foreign and domestic). Based on the information given, shift the appropriate curve and indicate what happens to market price and quantity. Finally write the determinant, if any. 46.) New robot technology increases efficiency: Determinant: Change in technology 47.) Nationwide auto strike began at midnight: Determinant: Change in number of producers 48.) New import quotas reduce foreign car imports: Determinant: Change in number of producers 49.) Cost of steel rises: Determinant: Change in input price

7 For questions draw a demand and supply curve for the automobile market (foreign and domestic). Based on the information given, shift the appropriate curve and indicate what happens to market price and quantity. Finally write the determinant, if any. 50.) Auto producer goes bankrupt; closes operation: Determinant: Change in number of producers 51.) Buyers reject new models: Determinant: Change in tastes or preferences 52.) National income rises 2%: Determinant: Change in consumer income 53.) a. c. The decrease in the price of gasoline caused a rightward shift in the demand for large cars. As a result of the shift, the equilibrium price of large cars rose and the equilibrium quantity of large cars bought and sold also rose. The technological innovation has caused a rightward shift in the supply of fresh paper made from recycled stock. As a result of this shift, the equilibrium price of fresh paper made from recycled stock has fallen and the equilibrium bought and sold has risen. The fall in the price of pay-per-view movies causes a leftward shift in the demand for movies at local movie theaters. As a result of this shift, the equilibrium price of movie tickets falls and the equilibrium number of people who go to the movies also falls.

8 54.) Upon the announcement of the new chip, the demand curve for computers using the earlier chip sifts leftward (demand decreases), and the supply curve for these computers shifts rightward (supply increases). a. If demand decreases relatively more than supply increases, then the equilibrium quantity falls as shown below (price falls): If supply increases relatively more than demand decreases, then the equilibrium quantity rises as shown below (price falls):