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Exam 2: Demand, Supply, and Equilibrium Prices

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Question 31

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Assume the supply function for good X can be written as Qs = -100 + 27Px - 5Py - 1.8W where Px = the price of X, Py = the price of good Y, and W = Wage index for workers in industry X. This equation implies that X and Y are substitutes in production.

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Question 32

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Assuming there is a rise in supply of copper, if the market for copper is allowed to adjust, the ultimate result will be:

A) an increase in price and an increase in the quantity demanded.
B) an increase in price and an increase in the quantity supplied.
C) a decrease in price and an increase in the quantity demanded.
D) a decrease in price and an increase in the quantity supplied.

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Question 33

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A home theater system and an HD television would be considered an example of:

When price is greater than the market equilibrium price, a shortage is created.

DSL and broadband internet service would be considered an example of:

Because unemployment is a macroeconomic topic, an increase in unemployment would not be expected to have any impact on the equilibrium price or quantity in the market for an individual good.

Assume the market for cell phone service is initially in equilibrium.An increase in supply would cause a surplus at the initial equilibrium price.The market adjustment would then involve a decrease in price which would in turn cause quantity demanded to increase and quantity supplied to decrease until equilibrium is reestablished.

If the price of salmon increases relative to the price of cod, the demand for:

Distinguish between "a change in demand" and "a change in quantity demanded." What are the causes of each type of change and how do we illustrate them graphically?

Assume the Congress approves increased drilling for oil in the U.S.to address the current energy shortage.People who are in favor of this policy argue that, ceteris paribus, this would cause:

Assume there is a simultaneous increase in home foreclosures and a decrease in consumer incomes.Based on this information we can conclude, with certainty, that in the market for used single-family homes equilibrium:

Assume there is a simultaneous decrease in the incomes of people in the market for new homes and a decrease in the wages paid to carpenters, plumbers, and electricians.All else constant, we can predict, with certainty, that in the market for new homes the equilibrium:

A decrease in the incomes of people who buy canoes would cause the demand for canoes to decrease.

Which of the following would not cause the supply curve for gasoline to shift?

Which of the following would cause a change in supply, as opposed to a change in quantity supplied, in the market for used homes?

Assume the demand function for good X can be written as Qd = 80 - 3Px + 2Py + 10I, where Px = the price of X, Py = the price of good Y, and I = Consumer income.According to this equation:

All else constant, an increase in the incomes of consumers in the market for diamonds would cause the supply of diamonds to increase.

List the factors that influence supply.How does a change in each of the factors you have listed affect the supply curve?

According to the case for analysis (Demand and Supply in the Copper Industry) in the text, all of the following can lead to a decline in the price of copper except:

Assume there is a simultaneous decrease in the cost of batteries used in hybrid cars and a shift in consumer preferences toward more fuel-efficient vehicles.Based on this, we can conclude, with certainty, that in the market for hybrid cars, equilibrium: