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Exam 2: Demand and Supply: an Introduction

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Question 21

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Table 2.11 depicts the market for mushrooms (in thousands of kilograms per month) . -Refer to Table 2.11 to answer this question. What will happen if the price of the product is $3?

A) There would be a surplus of 18, which would lead to a decrease in price.
B) There would be a shortage of 18, which would lead to an increase in price.
C) There would be a shortage of 18, which would lead to a decrease in price.
D) There would be a surplus of 18, which would lead to an increase in price.
E) There would be neither a surplus nor a shortage.

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Question 22

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$\begin{array}{llcc} \text { 1. An increase in price: } & \text { A. An increase in the quantity traded: } \\ \text { 2. A decrease in price: } & \text {B. A decrease in the quantity traded; } \\ \text { 3. No change in price: } & \text {C. No change in quantity traded. } \\\end{array}$ -Refer to the above information to answer this question. What is the effect of an increase in business taxes?

A) 1 and A.
B) 1 and B.
C) 1 and C.
D) 2 and A
E) 2 and B
F) 1 and C

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Question 23

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The following figure shows the market for grapefruit (in kilos) : -Refer to the diagram above to answer this question. If the price of oranges (a substitute) were to decrease, causing the demand for grapefruit to change by 12 kilos, what will be the new equilibrium price and quantity?

What is the effect of a decrease in business taxes?

The term "demand" means the quantities that people would like to purchase at various different prices.

What is the effect of a decrease in the supply of a product?

What is the term for those products which tend to be purchased jointly and whose demands therefore are related?

What is the term for the substitution of one product for another as a result of a change in their relative prices?

An increase in the price of a product leads to an increase in the supply.

Which of the following factors will shift the demand curve to the left?

Which of the following is explained by the combination of the substitution effect and the income effect?

Which of the following could cause an increase in the supply of wheat?

Assume the market for apple pie is initially in equilibrium. a) Draw a demand and supply diagram to illustrate the initial equilibrium. b) Explain the impact on the apple pie market if there is an increase in the price of vanilla ice cream. c) Graphically illustrate the impact on the diagram you prepared for part (a).

Surpluses drive prices up; shortages drive prices down.

Demonstrate graphically and explain verbally the difference between an increase in the quantity demanded and an increase in demand. Describe what might have caused each to occur.

-Refer to the above graph to answer this question. What is the minimum price the quantity sold at a price of $14 could have been sold for?

All of the following except one will cause the demand for a normal product to increase. Which is the exception?

All of the following, except one, would cause an increase in demand for a normal product. Which is the exception?

The following table shows the initial weekly demand (D1) and the new demand (D2) for packets of pretzels (a bar snack) : $\begin{array} { c c c } \text { Price(\$) } & \begin{array} { c } \text { Quantity } \\\text { Demanded (D1) }\end{array} & \begin{array} { c } \text { Quantity } \\\text { Demanded (D2) }\end{array} \\1.00 & 1,000 & 1,100 \\1.50 & 980 & 1,080 \\2.00 & 960 & 1,060 \\2.50 & 940 & 1,040 \\3.00 & 920 & 1,020\end{array}$ -Refer to the information above to answer this question. In order to have produced the change in demand from D1 to D2, what might have happened to the price of a complementary product like beer?

$\begin{array} { c c c } \text { Price (\$million) } & \text { Quantity Demanded } & \text { Quantity Supplied } \\\$ 10 & 10 & 6 \\\$ 20 & 9 & 6 \\\$ 30 & 8 & 6 \\\$ 40 & 7 & 6 \\\$ 50 & 6 & 6 \\\$ 60 & 5 & 6 \\\$ 70 & 4 & 6 \\\$ 80 & 3 & 6\end{array}$ If the market price for a limited number of hotels in the downtown business district area depends on supply and demand. -Refer to the above information to answer this question. If two new buyers enter this market, what are the new equilibrium values of price and quantity?