Question 1

A musical group called "The Grateful Dead" sold out concert after concert and typically provided a good living for scalpers (who buy tickets and resell them).Explain (using a supply and demand diagram)how The Grateful Dead's ticket pricing policy set an effective ceiling on the price of concert tickets.If there were a fixed number of seats at their concerts,what was the shape of the supply curve for these seats?

Accepted Answer

By setting a top ticket price at a level below the market-clearing price,the Grateful Dead guaranteed that there would be an excess demand for their concert tickets.This is illustrated in the diagram below.The official price (P_O)effectively sets a ceiling on the price that is below the market-clearing price.At this official price,there is an excess demand for tickets (Q_D > Q_S).The supply curve for tickets was vertical,since for any given show there were only so many seats available.

Question 2

Start by drawing a supply and demand equilibrium situation.Using your diagram,demonstrate graphically and explain verbally the impact of a decrease in supply on equilibrium price and quantity.What could cause this shift?

Accepted Answer

The diagram: The initial equilibrium is point A.A decrease in supply is shown as the shift from S₀ to S₁.The new equilibrium is point B with a higher price level (P₁ > P₀)and a lower quantity exchanged (Q₁ < Q₀).An increase in sales tax,or an increase in factor cost,could cause this shift.

Question 3

What is a living wage? Why did many states find it necessary to establish a living wage?

Accepted Answer

A living wage is defined by the living wage movement as the wage necessary to support a family at or above the federally determined poverty line.Many states found it necessary to establish a living wage because the federal minimum wage is too low and is not binding for most workers (i.e.,the minimum wage is below the equilibrium wage).

Question 4

What is a third-party payer market? Give an example.

Accepted Answer

The answer of What is a third-party payer market? Give...

Question 5

Start by drawing a supply and demand equilibrium situation.Using your diagram,demonstrate graphically and explain verbally the impact of a decrease in demand and an increase in supply on equilibrium price and quantity.

Accepted Answer

The answer of Start by drawing a supply and demand...

Question 6

Define an excise tax and give three examples.Explain the relationship between a tariff and an excise tax.Use supply and demand analysis to explain why the equilibrium price of apples will rise and the equilibrium quantity will fall if an excise tax is levied on apples.Explain why the price of apples will not rise by the full amount of the tax.

Accepted Answer

The answer of Define an excise tax and give three...

Question 7

What is meant by the dollar-euro exchange rate? In what market is this rate determined? What factors will cause the dollar value of the euro to rise? What factors will cause the dollar value of the euro to fall?

Accepted Answer

The answer of What is meant by the dollar-euro exchange...

Question 8

Demonstrate graphically and explain verbally the impact on a supply and demand equilibrium of an effective price ceiling.

Accepted Answer

The answer of Demonstrate graphically and explain verbally the impact...

Question 9

Explain the shifts in demand and/or supply that can result in the following observations: (Assume the demand curve is downward sloping and the supply curve is upward sloping.)
(a)Both price and quantity rise.
(b)Price rises,quantity falls.
(c)Price rises,quantity doesn't change.
(d)Quantity rises,price doesn't change.

Accepted Answer

The answer of Explain the shifts in demand and/or supply...

Question 10

How does total size of expenditures in a third-part payer market compare to the total size of expenditures in a market with no third-party payer?

Accepted Answer

The answer of How does total size of expenditures in...

Question 11

As a result of the rapid growth of the Chinese economy,world demand for petroleum products has increased significantly.At the same time the war in Iraq has reduced that nation's petroleum production and exports to levels that are well below pre-war levels.Both events have had significant impacts on world oil prices.How would the simple supply and demand model apply to this case?

Accepted Answer

The answer of As a result of the rapid growth...

Question 12

Start by drawing a supply and demand equilibrium situation.Using your diagram,demonstrate graphically and explain verbally the impact of an increase in demand on equilibrium price and quantity.What could cause this shift?

Accepted Answer

The answer of Start by drawing a supply and demand...

Question 13

Suppose as a result of a recession and falling interest rates in the United States,European investors buy fewer U.S.financial assets.Conversely,U.S.investors decide to buy more European stocks.Use supply/demand analysis to show graphically why the value of the euro relative to the dollar increases.

Accepted Answer

The answer of Suppose as a result of a recession...

Question 14

What is a price ceiling? What is a price floor? Give a real world example of each.What happens to the relationship between quantity demanded and the quantity supplied with an effective price ceiling? What happens to the relationship between quantity demanded and the quantity supplied with an effective price floor? What is likely to happen if there is a shortage of rent controlled apartments? What is likely to happen if there is a surplus of price supported grain?

Accepted Answer

The answer of What is a price ceiling? What is...

Question 15

Over the past decade average household incomes have grown.Americans have spent heavily on electrical appliances,boosting demand for electricity faster than capacity is being added.The result has been a simultaneous increase in the equilibrium price and quantity of electricity.Analyze this change using a supply and demand diagram.

Accepted Answer

The answer of Over the past decade average household incomes...

Question 16

What is a price ceiling? What happens to the relationship between quantity demanded and supplied with an effective price ceiling?

Accepted Answer

The answer of What is a price ceiling? What happens...

Question 17

In an effort to capture the attention-and dollars-of the demographically powerful Generation Y the Nike Company has moved beyond sportswear and has unveiled a new line of sports-focused electronics,such as digital audio players and high-tech walkie-talkies.
Analyze Nike's new business strategy using a supply and demand diagram.

Accepted Answer

The answer of In an effort to capture the attention-and...

Question 18

Start by drawing a supply and demand equilibrium situation.Using your diagram,demonstrate graphically and explain verbally the impact of an increase in demand and an increase in supply on equilibrium price and quantity.

Accepted Answer

The answer of Start by drawing a supply and demand...

Question 19

Americans over the age of 65 are covered by Medicare.For them,the medical market is a third-payer market.What is a third-party payer market? How does total quantity of medical services provided in a third-payer market,such as Medicare,compare to a market in which the purchaser of medical services pays the full cost? How does price of medical services provided in a third-part payer market,such as Medicare,compare to the price in a market in which the purchaser of medical services pays the full cost? If third-payer markets,such as Medicare,benefit buyers by providing a greater quantity of services and sellers by yielding a higher price,who is hurt by such a payments system?

Accepted Answer

The answer of Americans over the age of 65 are...

Question 20

What is a price floor? What happens to the relationship between quantity demanded and supplied with an effective price floor?

Accepted Answer

The answer of What is a price floor? What happens...

Quiz 5: Using Supply and Demand

Start by drawing a supply and demand equilibrium situation.Using your diagram,demonstrate graphically and explain verbally the impact of a decrease in supply on equilibrium price and quantity.What could cause this shift?

What is a living wage? Why did many states find it necessary to establish a living wage?

What is a third-party payer market? Give an example.

Start by drawing a supply and demand equilibrium situation.Using your diagram,demonstrate graphically and explain verbally the impact of a decrease in demand and an increase in supply on equilibrium price and quantity.

What is meant by the dollar-euro exchange rate? In what market is this rate determined? What factors will cause the dollar value of the euro to rise? What factors will cause the dollar value of the euro to fall?

Demonstrate graphically and explain verbally the impact on a supply and demand equilibrium of an effective price ceiling.

How does total size of expenditures in a third-part payer market compare to the total size of expenditures in a market with no third-party payer?

Start by drawing a supply and demand equilibrium situation.Using your diagram,demonstrate graphically and explain verbally the impact of an increase in demand on equilibrium price and quantity.What could cause this shift?

Suppose as a result of a recession and falling interest rates in the United States,European investors buy fewer U.S.financial assets.Conversely,U.S.investors decide to buy more European stocks.Use supply/demand analysis to show graphically why the value of the euro relative to the dollar increases.

What is a price ceiling? What happens to the relationship between quantity demanded and supplied with an effective price ceiling?

Start by drawing a supply and demand equilibrium situation.Using your diagram,demonstrate graphically and explain verbally the impact of an increase in demand and an increase in supply on equilibrium price and quantity.

What is a price floor? What happens to the relationship between quantity demanded and supplied with an effective price floor?