Question 1

"The market has failed to provide enough rental housing in New York City. This demonstrates another failure of free markets-they may lead to shortages of necessities." Explain why you agree or disagree.

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Question 2

List some of the problems that may arise when prices are controlled.

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Question 3

Draw a graph of a market in equilibrium. Describe what might cause a change in demand or supply and how this would affect the diagram. Indicate how the equilibrium price and quantity will change.

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Question 4

Distinguish the terms price ceiling and price floor.

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Question 5

Price floors are typically accompanied by a standard series of symptoms. What are they?

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Question 6

Why are sellers willing to sell more at a higher price?

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Question 7

Explain the effect of the following changes on equilibrium price and quantity of a commodity: 
(a) increase in average incomes. 
(b) increase in population.

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Question 8

The demand for home computers has increased, yet the price has fallen. Explain this apparent paradox.

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Question 9

Give an example of a price ceiling. Draw a corresponding diagram and explain why there is a continuing shortage.

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Question 10

Some hotels in Myrtle Beach, South Carolina charge over $200 a night in the summer but sometimes as little as $99 a night in the winter. Use supply and demand analysis, including graphical and verbal explanation, for these winter "sales."

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Some hotels in Myrtle Beach, South...

Question 11

In some markets, demand can be approximated by 
  Q = 50 − 5P + 10Y 
where Q is quantity, P price per unit, and Y = buyers' income. Supply can be approximated by 
  Q = − 5 + 10P. 
a. If Y = 20, what is equilibrium price and output? 
b. If Y rises to 25, what is the new equilibrium price and output?

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Question 12

Show graphically the effect of technological advance on the price of music downloads. In a separate graph, show what happens to the price of CDs as a secondary effect of the new download technology.

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Show graphically the effect of technological...

Question 13

Suppose demand can be described with the equation Q = 900 − 5P and supply with the equation Q = 100 + 5P. 
a. Determine the equilibrium price and quantity. 
b. Determine the surplus or shortage if the price were $100.

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Question 14

The demand for a textbook written by Schwarz and Mobley is Q = 20,000 − 50P; supply is Q = 2,000 + 100P. Students complain about the high price of textbooks, so a price ceiling is imposed, which unfortunately leads to a shortage of texts. Below what price will shortages occur?

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Question 15

Suppose demand can be described with the equation Q = 900 − 5P and supply with the equation Q = 100 + 5P. Complete the following table. Determine the equilibrium price and quantity.

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Question 16

Define equilibrium as it relates to markets. Describe the process by which a market reaches a new equilibrium. Include an appropriate diagram.

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Question 17

Give an example of a price floor. Draw a corresponding diagram and explain why there is a continuing surplus.

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Quiz 4: Supply and Demand: an Initial Look