Question 1

What happens if the price of a product is below the equilibrium price?

Accepted Answer

When the price of a product is below the equilibrium price, there will be an excess demand for the product. This means that more people want to buy the product than there is available at that price. As a result, the suppliers may increase the price until the excess demand is eliminated and the market reaches equilibrium.

Question 2

Peaches and cream are complements. When the price of peaches falls and the price of raw milk (used to make cream) rises:

Accepted Answer

When the price of peaches falls, demand for cream (a complement) increases, potentially raising its price. However, if the price of raw milk (an input for cream) rises, the supply of cream might decrease, increasing its price further. The quantity of cream could either rise due to increased demand or fall due to decreased supply, making the outcome uncertain.

Question 3

Figure 4.7
-If supply increases in Figure 4.7, then the equilibrium:

Accepted Answer

An increase in supply will shift the supply curve to the right, resulting in a new equilibrium point with a lower price and a higher quantity sold. Therefore, the correct answer is C) price falls and quantity rises.

Question 4

Figure 4.3
-Figure 4.3 illustrates the supply and demand for blue jeans. If the actual price of blue jeans is $30, there is:

Accepted Answer

At a price of $30, the quantity demanded exceeds the quantity supplied by 40 pairs of blue jeans, meaning there is excess demand. This is because the demand curve intersects the supply curve at a point where the quantity supplied is 110 and the quantity demanded is 150, resulting in a shortage of 40 pairs of blue jeans. Therefore, the correct answer is C) excess demand of 40 pairs of blue jeans.

Question 5

Bananas and apples are substitutes. When the price of bananas rises and a technological advance in apple production occurs at the same time:

Accepted Answer

When the price of bananas rises, consumers will switch to apples, increasing the demand for apples. Simultaneously, a technological advance in apple production increases the supply of apples. The increased demand raises the price, while the increased supply tends to lower the price. The net effect on price is uncertain without more information. However, both effects lead to an increase in the equilibrium quantity of apples.

Question 6

Recall Application 3, "The Supply and Demand for Cruise Ship Berths," to answer the following questions:
-Based on what we learned from the application, one way to increase the price of cruise ship berths is to:

Accepted Answer

Retiring some cruise ships reduces supply, increasing prices. Getting the economy out of a recession increases demand, also raising prices.

Question 7

Judy demands more peanuts as her income increases. From this, we can conclude that, for Judy:

Accepted Answer

Judy's increasing demand for peanuts as her income increases indicates that peanuts are a normal good. As her income rises, Judy has more disposable income available to spend, and she chooses to spend some of it on an increasing quantity of peanuts, which are a normal good.

Question 8

A decrease in demand for coffee can be caused by:

Accepted Answer

A decrease in demand for coffee can be caused by changing preferences towards healthier products, an increase in income if coffee is considered an inferior good, and an increase in demand for substitutes by younger populations.

Question 9

If the government imposes a price floor that is above the equilibrium price, then the market will experience:

Accepted Answer

When the government imposes a price floor above the equilibrium price, it results in a price that is higher than what the market would naturally set. This leads to an excess supply because producers are willing to supply more at the higher price, but consumers are not willing to buy as much at that price, leading to a surplus of the product in the market.

Question 10

Figure 4.3
-Figure 4.3 illustrates the supply and demand for blue jeans. If the actual price of blue jeans is $30, we would expect the price of blue jeans to _______, the quantity demanded of blue jeans to _______, and the quantity supplied of blue jeans _______.

Accepted Answer

The answer of  Figure 4.3
-Figure 4.3 illustrates the supply...

Question 11

Figure 4.1
-Refer to Figure 4.1 that shows Mary and Tom's individual demand curves for meals per week at Fratelli's Italian Restaurant. Assuming Mary and Tom are the only consumers in the market, if the market quantity demanded is 6, the price must be:

Accepted Answer

The market quantity demanded is the sum of Mary and Tom's individual demands. At a price of $10, both Mary and Tom demand 3 meals each, totaling 6 meals, which matches the market quantity demanded.

Question 12

Suppose that in 2006, 12 million cars were purchased at $15,000 each, while in 2007, 10 million cars were purchased at $12,000 each. What might have caused this change?

Accepted Answer

The decrease in the number of cars purchased and the decrease in price suggest that the demand for cars decreased, potentially due to a decrease in consumer income or an increase in the availability of substitutes such as airplane travel. Therefore, D, that the price of airplane tickets (a substitute for cars) fell, is the best choice.

Question 13

Figure 4.6
-Figure 4.6 illustrates a set of supply and demand curves for a product. When the economy moves from point B to point C, there has been:

Accepted Answer

The answer of  Figure 4.6
-Figure 4.6 illustrates a set...

Question 14

Figure 4.5
-Figure 4.5 illustrates the supply of guitars. A technological advancement that makes guitars cheaper to produce would most likely cause a movement from:

Accepted Answer

The answer of    Figure 4.5
-Figure 4.5 illustrates...

Question 15

Suppose that a market for a product is in equilibrium at a price of $5 per unit. At any price above $5 per unit:

Accepted Answer

At any price above $5 per unit, the price is higher than the equilibrium price of $5. This means that producers are willing to supply more of the product than consumers demand at that higher price (C). This leads to excess supply, or a surplus of the product, on the market (B).

Question 16

Suppose that a new study is released stating that consumption of orange juice (a substitute for apple juice) reduces the risk of cancer and a major freeze destroys half of the country's apple crop. What happens to the price and quantity of apple juice?

Accepted Answer

The release of the new study stating that orange juice reduces the risk of cancer will increase the demand for orange juice as a substitute for apple juice. This would lead to a decrease in the demand for apple juice, causing the quantity of apple juice to fall. Meanwhile, the major freeze destroying half of the country's apple crop will decrease the supply of apple juice. As a result, the price of apple juice might rise or fall depending on the extent of the decrease in supply, while the quantity of apple juice will fall due to the decrease in demand and supply.

Question 17

When the price of a substitute product decreases, the demand for a substitute product:

Accepted Answer

When the price of a substitute product decreases, consumers are more likely to purchase the cheaper substitute, leading to a decrease in demand for the original product.

Question 18

The market supply curve is:

Accepted Answer

The market supply curve is typically upward sloping because as prices increase, producers are willing to supply more. It is flatter than an individual's supply curve because it represents the aggregation of all individual supply curves in the market, which smooths out individual variations.

Question 19

The market supply curve is:

Accepted Answer

The market supply curve is upward sloping because as the price of a good or service increases, suppliers are willing to produce and supply more of it to the market. This is because higher prices mean higher profits for suppliers, which incentivizes them to increase their production. Conversely, as the price of a good or service decreases, suppliers are willing to produce and supply less of it to the market because lower prices mean lower profits. Therefore, the market supply curve slopes upward.

Question 20

Figure 4.7
-If demand decreases and supply increases in Figure 4.7, then the equilibrium:

Accepted Answer

If demand decreases and supply increases, the market will have excess supply. This means that there will be a surplus of goods in the market, leading to a decrease in price as sellers try to clear their inventories. Therefore, the equilibrium price falls. The quantity traded in the market will depend on the magnitude of the shifts in demand and supply. If the increase in supply is larger than the decrease in demand, the quantity traded will increase, and vice versa. However, we cannot determine the direction of the change in quantity traded with certainty, as it depends on the relative magnitude of the shifts in demand and supply.

Quiz 4: Demand, Supply, and Market Equilibrium

What happens if the price of a product is below the equilibrium price?

Peaches and cream are complements. When the price of peaches falls and the price of raw milk (used to make cream) rises:

Figure 4.7 -If supply increases in Figure 4.7, then the equilibrium:

Figure 4.3 -Figure 4.3 illustrates the supply and demand for blue jeans. If the actual price of blue jeans is $30, there is:

Bananas and apples are substitutes. When the price of bananas rises and a technological advance in apple production occurs at the same time:

Recall Application 3, "The Supply and Demand for Cruise Ship Berths," to answer the following questions: -Based on what we learned from the application, one way to increase the price of cruise ship berths is to:

Judy demands more peanuts as her income increases. From this, we can conclude that, for Judy:

A decrease in demand for coffee can be caused by:

If the government imposes a price floor that is above the equilibrium price, then the market will experience:

Figure 4.3 -Figure 4.3 illustrates the supply and demand for blue jeans. If the actual price of blue jeans is $30, we would expect the price of blue jeans to ___, the quantity demanded of blue jeans to _, and the quantity supplied of blue jeans _____.

Figure 4.1 -Refer to Figure 4.1 that shows Mary and Tom's individual demand curves for meals per week at Fratelli's Italian Restaurant. Assuming Mary and Tom are the only consumers in the market, if the market quantity demanded is 6, the price must be:

Suppose that in 2006, 12 million cars were purchased at $15,000 each, while in 2007, 10 million cars were purchased at $12,000 each. What might have caused this change?

Figure 4.6 -Figure 4.6 illustrates a set of supply and demand curves for a product. When the economy moves from point B to point C, there has been:

Figure 4.5 -Figure 4.5 illustrates the supply of guitars. A technological advancement that makes guitars cheaper to produce would most likely cause a movement from:

Suppose that a market for a product is in equilibrium at a price of $5 per unit. At any price above $5 per unit:

Suppose that a new study is released stating that consumption of orange juice (a substitute for apple juice) reduces the risk of cancer and a major freeze destroys half of the country's apple crop. What happens to the price and quantity of apple juice?

When the price of a substitute product decreases, the demand for a substitute product:

The market supply curve is:

The market supply curve is:

Figure 4.7 -If demand decreases and supply increases in Figure 4.7, then the equilibrium:

Quiz 4: Demand, Supply, and Market Equilibrium

What happens if the price of a product is below the equilibrium price?

Peaches and cream are complements. When the price of peaches falls and the price of raw milk (used to make cream) rises:

Figure 4.7 -If supply increases in Figure 4.7, then the equilibrium:

Figure 4.3 -Figure 4.3 illustrates the supply and demand for blue jeans. If the actual price of blue jeans is $30, there is:

Bananas and apples are substitutes. When the price of bananas rises and a technological advance in apple production occurs at the same time:

Recall Application 3, "The Supply and Demand for Cruise Ship Berths," to answer the following questions: -Based on what we learned from the application, one way to increase the price of cruise ship berths is to:

Judy demands more peanuts as her income increases. From this, we can conclude that, for Judy:

A decrease in demand for coffee can be caused by:

If the government imposes a price floor that is above the equilibrium price, then the market will experience:

Figure 4.3 -Figure 4.3 illustrates the supply and demand for blue jeans. If the actual price of blue jeans is $30, we would expect the price of blue jeans to _______, the quantity demanded of blue jeans to _______, and the quantity supplied of blue jeans _______.

Figure 4.1 -Refer to Figure 4.1 that shows Mary and Tom's individual demand curves for meals per week at Fratelli's Italian Restaurant. Assuming Mary and Tom are the only consumers in the market, if the market quantity demanded is 6, the price must be:

Suppose that in 2006, 12 million cars were purchased at $15,000 each, while in 2007, 10 million cars were purchased at $12,000 each. What might have caused this change?

Figure 4.6 -Figure 4.6 illustrates a set of supply and demand curves for a product. When the economy moves from point B to point C, there has been:

Figure 4.5 -Figure 4.5 illustrates the supply of guitars. A technological advancement that makes guitars cheaper to produce would most likely cause a movement from:

Suppose that a market for a product is in equilibrium at a price of $5 per unit. At any price above $5 per unit:

Suppose that a new study is released stating that consumption of orange juice (a substitute for apple juice) reduces the risk of cancer and a major freeze destroys half of the country's apple crop. What happens to the price and quantity of apple juice?

When the price of a substitute product decreases, the demand for a substitute product:

The market supply curve is:

The market supply curve is:

Figure 4.7 -If demand decreases and supply increases in Figure 4.7, then the equilibrium:

Figure 4.3 -Figure 4.3 illustrates the supply and demand for blue jeans. If the actual price of blue jeans is $30, we would expect the price of blue jeans to ___, the quantity demanded of blue jeans to _, and the quantity supplied of blue jeans _____.