CH3: Demand and Supply

A demand curve slopes downward because:

people are only willing to buy more at lower prices.

Name the factor that affects demand.

You hear a rumor that a new and improved model of the phone you want is coming out next year.  

Expectations

Name the factor that affects demand.

Your grandparents give you $500.  

Income

Name the factor that affects demand.

A cellular network announces a holiday sale on a data package that includes the purchase of a new smartphone.  

Price of a related good

Name the factor that affects demand.

A friend tells you how great his new phone is and suggests that you get one, too.

Consumer preferences

Describe its impact on your demand for a new cell phone.

You hear a rumor that a new and improved model of the phone you want is coming out next year. Demand will:

decrease

Describe its impact on your demand for a new cell phone.

Your grandparents give you $500. Demand will:

increase

Describe its impact on your demand for a new cell phone.

A cellular network announces a holiday sale on a data package that includes the purchase of a new smartphone. Demand will: 

increase

Describe its impact on your demand for a new cell phone.

A friend tells you how great his new phone is and suggests that you get one, too. Demand will:

increase

The price of cell phones goes down by 25 percent during a sale. This event would cause ______ the demand curve.

movement along

You get a 25 percent raise at your job. This event would cause ______ the demand curve.

a shift of

Which of the following statements is true?

A change in price will mean a movement along an existing demand curve.

When a non-price factor changes—such as income, expectations, prices of related goods, consumer preferences, or the number of buyers, there is a change in:

demand and the entire curve shifts.

When there is a change in the specific numerical quantity demanded due to a change in price this is referred to as a change in:

quantity demanded and the demand curve does not shift.

A supply curve slopes upward because sellers are willing to sell:

more at higher prices, because they have more revenue than they had when they offered lower prices.

A fruit worm infestation ruins a large number of apple orchards in the state of Washington. This event would cause a _____ the supply curve in the market for apples.

shift of

Demand for apples goes down, causing the price to fall. This event would cause a _____ the supply curve in the market for apples.

movement along

Considering the events described above, which of the following statements is true?

A change in price will mean a movement along an existing supply curve.

When a non-price factor changes—such as technology, expectations, prices of related goods, prices of inputs, or the number of sellers, there is a change in:

supply and the entire curve shifts.

When there is a change in the amount firms produce due to a change in price, this is referred to as a change in:

quantity supplied and the supply curve does not shift.

All of the farmers have their prices posted prominently in front of their stalls.

Full information

Cucumbers are the same price at each stall.

Participants are price takers

There is no difficulty moving around between stalls as you shop and choosing between farmers.

No transaction costs

You and the other customers all seem indifferent about which cucumbers to buy.

Standardized good

If a decrease in the price of laptops causes the demand for tablets to increase, laptops and tablets are:

complements

A drought hits corn-growing regions, cutting the supply of corn.

Movement along the demand curve

The government announces a new subsidy for biofuels made from corn.

Rightward shift of demand

A global recession reduces the incomes of consumers in poor countries, who rely on corn as a staple food (assuming corn is a normal good).

Leftward shift of demand

An advertising campaign by the beef producers' association highlights the health benefits of corn-fed beef.

Rightward shift of demand

The figure below shows three monthly market demand curves for sweaters at a local clothing store. Indicate where the new point will be after the event occurs.

• Sweaters fall out of fashion:

• There is a shortage of wool:

• The winter is particularly long and cold this year:

• Sweater vendors offer a sale:

D, B, E, C

A steel tariff increases the price of steel.

Prices of inputs

Improvements in robotics increase efficiency and reduce costs.

Technology

Factories close because of an economic downturn.

Number of sellers

The government announces a plan to offer tax rebates for the purchase of commuter rail tickets.

Expectations

The price of trucks falls, so factories produce more cars.

Prices of related goods

The figure below shows three monthly market supply curves for sweaters at a local craft market.

• The price of wool increases:

• Demand for sweaters decreases:

• A particularly cold winter is expected to begin next month:

• Demand for sweaters increases:

look for shift (non-price factor) or movement (price change)

C, E, B, D

Refer to the demand and supply schedule shown in the table below.

• If pizza parlors charge $3.50 per slice, there will be an excess:

• If pizza parlors charge $1.00 per slice, there will be an excess:

supply of 400 units. demand of 100 units.

The graph in the figure below shows the weekly market for pizzas in a small town. Which of the following events will occur at a price of $20?

Excess Supply

Which of the following events will occur at a price of $10?

Excess Demand

The graph in the figure below shows the weekly market for pizzas in a small town.

The equilibrium price is $ _____ per slice, and the equilibrium quantity is ______ slices of pizza.

15, 150

The graph below shows supply and demand in the market for automobiles.

1. a. Environmentalists launch a successful One Family, One Car campaign.

2. b. A steel tariff increases the price of steel.

3. c. A baby boom occurred 16 years ago.

4. d. An oil shortage causes the price of gasoline to soar.

5. e. Improvements in robotics increase efficiency and reduce costs.

6. f. The government offers a tax rebate for the purchase of commuter rail tickets.

A, B, C, A, D, A