Question 1

Sabrina decided to start selling lemonade on her street. The other kids in the neighborhood noticed that Sabrina was making a lot of money selling lemonade. These kids decided to open their own lemonade stand. When they opened their own lemonade stand, the equilibrium price _______and the equilibrium quantity_______ .

Accepted Answer

The entry of new sellers (the other kids in the neighborhood) increases the supply of lemonade, causing the equilibrium price to decrease and the equilibrium quantity to increase.

Question 2

A decrease in demand is represented by a

Accepted Answer

A decrease in demand means that consumers want to buy less of the good or service at any given price. This is represented by a shift of the demand curve to the left, as the quantity demanded at every price level decreases.

Question 3

When supply shifts to the right and demand stays constant, the equilibrium price _______and the equilibrium quantity_______ .

Accepted Answer

When supply increases (shifts to the right) and demand stays constant, the equilibrium price decreases due to the higher availability of the product, and the equilibrium quantity increases because more of the product is available at a lower price.

Question 4

What would happen to the equilibrium price and quantity of shirts if the price of cotton decreases and all else is held constant?

Accepted Answer

A decrease in the price of cotton, a key input in shirt production, would lower production costs for manufacturers. This would likely lead to an increase in supply, causing the equilibrium price to fall and the equilibrium quantity to rise as more shirts are produced and sold at a lower price.

Question 5

Wine and cheese are complement goods because they are consumed together. What would we expect to happen to the equilibrium quantity of cheese if the price of wine increased and all else is held constant?

Accepted Answer

Wine and cheese are complement goods, meaning if the price of wine increases, the demand for cheese will decrease as consumers may be less willing to buy cheese without wine. This decrease in demand will shift the demand curve for cheese to the left, resulting in a decrease in equilibrium quantity of cheese.

Question 6

The equilibrium price of teddy bears is $5. A study comes out that says owning a teddy bear causes you to earn a lower salary. If all other factors are held constant, which of the following scenarios could happen?

Accepted Answer

The study suggesting a negative outcome from owning teddy bears would likely decrease consumer demand, leading to a decrease in price due to a shift in the demand curve, not the supply curve.

Question 7

Oil is a main component in the manufacture of plastic bags. If the price of oil were to increase, the price of plastics bags would _______and the quantity would _______.

Accepted Answer

If the price of oil were to increase, the cost of manufacturing plastic bags would increase as well, resulting in an increase in the price of plastic bags. In turn, this increase in price would lead to a decrease in the quantity demanded by consumers, resulting in a decrease in quantity.

Question 8

When the demand curve shifts to the left and all else is held constant, the equilibrium price_______ and the equilibrium quantity_______ .

Accepted Answer

When the demand curve shifts to the left, it indicates a decrease in demand. This leads to a lower equilibrium price and a lower equilibrium quantity, as suppliers will reduce prices to sell their now less demanded products, and the quantity sold will also decrease due to the lower demand.

Question 9

Refer to the accompanying diagram. Which of the following scenarios would explain this change in equilibrium?

Accepted Answer

An increase in the price of a substitute good would cause consumers to switch from that good to this good, increasing the demand for this good and shifting the equilibrium to the right.

Question 10

A technological advancement for Good A will shift the _______curve of Good A to the_______ , making the equilibrium price _______.

Accepted Answer

A technological advancement in the production of Good A would make its production more efficient, leading to an increase in supply. This shift in the supply curve to the right typically results in a lower equilibrium price, as more of the good can be produced at each price level.

Question 11

Assume that the market for baseballs is in equilibrium. There is a sudden decrease in income throughout the economy. If all else is held constant, we would expect that if baseballs are an) _______good, then the demand curve will shift to the_______ , causing the equilibrium price and quantity to_______ .

Accepted Answer

If baseballs are considered a normal good, a decrease in income would lead to a decrease in demand for baseballs. This is represented by a leftward shift of the demand curve. As a result, both the equilibrium price and quantity of baseballs would fall.

Question 12

According to the supply and demand model, when the cotton gin was invented, if all else was held constant, we would expect the equilibrium price of cotton to _______and the equilibrium quantity of cotton to_______ .

Accepted Answer

The invention of the cotton gin increased the productivity of cotton production, making it easier and faster to remove seeds from cotton. This means that the supply of cotton would increase, shifting the supply curve rightward. As a result, the equilibrium price of cotton would decrease, and the equilibrium quantity of cotton would increase.

Question 13

Leading economic indicators suggest that incomes will be going up next year. In response to these reports, companies are forecasting increased prices for future sales of their goods. As a result of these increases, the supply curve will

Accepted Answer

When companies forecast increased prices for future sales due to expected higher incomes, they anticipate higher demand. This anticipation might lead them to reduce the quantity supplied at current prices or increase prices, effectively shifting the supply curve to the left. A leftward shift in the supply curve, with demand holding or increasing, typically causes the equilibrium price to increase because the quantity of goods available at previous prices has decreased, leading to higher prices for the available supply.

Question 14

When a hurricane rips through Florida, the price of oranges rises because the

Accepted Answer

When a hurricane hits Florida, it damages the orange groves and disrupts the supply chain. This leads to a decrease in the supply of oranges, thereby shifting the supply curve to the left. As a result, the price of oranges increases. The demand for oranges, on the other hand, remains relatively constant. Therefore, neither the demand curve nor the equilibrium price will shift to the right.

Question 15

Taxes cause the equilibrium price of a good to

Accepted Answer

When taxes are imposed on a good or service, the cost of producing it increases, leading to a decrease in the supply of the good or service. This decrease in supply causes the equilibrium price of the good or service to increase. Therefore, taxes cause the equilibrium price of a good to increase.

Question 16

The market for footballs is perfectly competitive. If all else is held constant and the price of leather decreases, we would expect that the equilibrium quantity of footballs would_______ and the equilibrium price would _______.

Accepted Answer

If the price of leather decreases, the cost of production for footballs will decrease as well. This will shift the supply curve to the right, leading to an increase in equilibrium quantity. The decrease in production costs will also cause firms to lower the price of footballs in order to remain competitive, leading to a decrease in equilibrium price.

Question 17

Refer to the accompanying figure. What event would cause the supply curve to shift out?

Accepted Answer

The answer of Refer to the accompanying figure. What event...

Question 18

When firms in a market expect the price of their products to rise, the supply curve of their goods_______ , causing the equilibrium price to_______ .

Accepted Answer

The answer of When firms in a market expect the...

Question 19

The difference between a tax and a subsidy is that when the government places a tax on a good, it _______the equilibrium price and_______ the equilibrium quantity, whereas when the government places a subsidy on a good, it_______ the equilibrium price and_______ the equilibrium quantity.

Accepted Answer

A tax increases the cost of production, which shifts the supply curve to the left, decreasing the equilibrium quantity and increasing the equilibrium price. A subsidy decreases the cost of production, which shifts the supply curve to the right, increasing the equilibrium quantity and decreasing the equilibrium price.

Question 20

If all else is held constant, what would happen to the equilibrium price and quantity of iPhones if the price of an Android phone decreased?

Accepted Answer

If the price of Android phones decreased, their demand would increase, leading to a decrease in demand for iPhones. This would cause a leftward shift in the demand curve for iPhones, reducing both the equilibrium price and quantity. Therefore, both the price and quantity of iPhones would decrease if the price of Android phones decreased.

Quiz 3: The Market at Work: Supply and Demand

A decrease in demand is represented by a

When supply shifts to the right and demand stays constant, the equilibrium price _and the equilibrium quantity_ .

What would happen to the equilibrium price and quantity of shirts if the price of cotton decreases and all else is held constant?

Wine and cheese are complement goods because they are consumed together. What would we expect to happen to the equilibrium quantity of cheese if the price of wine increased and all else is held constant?

The equilibrium price of teddy bears is $5. A study comes out that says owning a teddy bear causes you to earn a lower salary. If all other factors are held constant, which of the following scenarios could happen?

Oil is a main component in the manufacture of plastic bags. If the price of oil were to increase, the price of plastics bags would _and the quantity would _.

When the demand curve shifts to the left and all else is held constant, the equilibrium price_ and the equilibrium quantity_ .

Refer to the accompanying diagram. Which of the following scenarios would explain this change in equilibrium?

A technological advancement for Good A will shift the ___curve of Good A to the_ , making the equilibrium price _____.

Assume that the market for baseballs is in equilibrium. There is a sudden decrease in income throughout the economy. If all else is held constant, we would expect that if baseballs are an) ___good, then the demand curve will shift to the_ , causing the equilibrium price and quantity to_____ .

According to the supply and demand model, when the cotton gin was invented, if all else was held constant, we would expect the equilibrium price of cotton to _and the equilibrium quantity of cotton to_ .

Leading economic indicators suggest that incomes will be going up next year. In response to these reports, companies are forecasting increased prices for future sales of their goods. As a result of these increases, the supply curve will

When a hurricane rips through Florida, the price of oranges rises because the

Taxes cause the equilibrium price of a good to

The market for footballs is perfectly competitive. If all else is held constant and the price of leather decreases, we would expect that the equilibrium quantity of footballs would_ and the equilibrium price would _.

Refer to the accompanying figure. What event would cause the supply curve to shift out?

When firms in a market expect the price of their products to rise, the supply curve of their goods_ , causing the equilibrium price to_ .

The difference between a tax and a subsidy is that when the government places a tax on a good, it ___the equilibrium price and_ the equilibrium quantity, whereas when the government places a subsidy on a good, it_ the equilibrium price and___ the equilibrium quantity.

If all else is held constant, what would happen to the equilibrium price and quantity of iPhones if the price of an Android phone decreased?