Question 1

In 2006, the base price of a Hummer SUV was about $30,000. By 2008 as gasoline prices increased,

Accepted Answer

As gasoline prices increased, consumers became less willing to purchase gas-guzzling SUVs like the Hummer. This caused a leftward shift in the demand curve for Hummers, meaning that at any given price, consumers were willing to purchase fewer Hummers. As a result, Hummer prices decreased in an attempt to entice buyers, and there was a movement down along the Hummer demand curve.

Question 2

-The figure above shows the market for airline tickets. In early 2008 the price of jet fuel rose. This change is shown in the figure as a shift from

Accepted Answer

An increase in the price of jet fuel will increase the cost of production for airlines, leading to a decrease in supply. This is shown as a shift from S0 to S1.

Question 3

In 2008, the average Big Mac costs $2.87. Energy costs account for 54 cents of the total cost (Wired magazine, November 2008). When the price of energy soared in 2008,

Accepted Answer

When the price of energy soared in 2008, the input costs of producing Big Macs increased. This caused a decrease in supply, as it became more expensive for producers to produce the same quantity of Big Macs at the existing price. Therefore, the supply curve shifted leftward.

Question 4

What leads to a decrease in the quantity demanded of a good or service?

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The answer of What leads to a decrease in the...

Question 5

What is the difference between a normal good and an inferior good? Give an example of each.

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The answer of What is the difference between a normal...

Question 6

-The figure above shows the market for airline tickets. In early 2008 firms negotiated lower wages with their workers. This change is shown in the figure as a shift from

Accepted Answer

The answer of 
-The figure above shows the market for...

Question 7

General Electric (GE) produces wind turbines that generate wind power. Over the past 10 years, technology has advanced in wind turbine production. As a result,

Accepted Answer

As technology advanced in wind turbine production, it became more efficient and cost-effective to produce wind-generated power. This has led to a decrease in price for wind-generated power, making it more affordable and therefore increasing the quantity of wind-generated power. This shift in demand and supply has resulted in a movement down along the demand curve for wind-generated power. Therefore, all of the above choices are correct.

Question 8

In 2008, the average Big Mac costs $2.87. Energy costs account for 54 cents of the total cost (Wired magazine, November 2008). The price of energy fell in late 2008, so there was in supply which resulted in a _ in the price of Big Macs.

Accepted Answer

The answer of In 2008, the average Big Mac costs...

Question 9

The Miami Dolphins play football in Joe Robbie Stadium which holds 76,500 seats. In 2007, attendance averaged about 70,000 fans per game. This means that the quantity supplied of seats is

Accepted Answer

The quantity supplied of seats refers to the total number of seats available in the stadium, which is 76,500.

Question 10

Farmers can use their land to grow soy beans or corn. If the price of corn rises,

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The answer of Farmers can use their land to grow...

Question 11

List the factors change demand and shift the demand curve. Tell what happens to demand and the demand curve when there is an increase in the factor.

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The answer of List the factors change demand and shift...

Question 12

An economist says: "The demand curve has two interpretations." What does the economist mean?

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The answer of An economist says: "The demand curve has...

Question 13

-The figure above shows the market for airline tickets. If airline tickets are a normal good, then the recession in 2008 that caused people's incomes to decrease lead to a shift from

Accepted Answer

The answer of 
-The figure above shows the market for...

Question 14

Explain why a relative price is an opportunity cost.

Accepted Answer

The answer of Explain why a relative price is an...

Question 15

What is the law of demand?

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The answer of What is the law of demand?...

Question 16

Consumers' income declines and, as a result, the demand for margarine increases. Is margarine a normal or an inferior good? Explain.

Accepted Answer

The answer of Consumers' income declines and, as a result,...

Question 17

Computers are a complement to computer software. Suppose the price of a computer falls. How does this fall in price affect the demand for computer software and the demand curve for computer software?

Accepted Answer

The answer of Computers are a complement to computer software....

Question 18

In early 2008 the price of gasoline increased 50 percent. This change caused

Accepted Answer

The answer of In early 2008 the price of gasoline...

Question 19

General Electric (GE) produces wind turbines that generate wind power. Over the past 10 years, the technology used to produce wind turbines has resulted in

Accepted Answer

Technological advancements typically lead to increased efficiency and lower production costs, resulting in a rightward shift in the supply curve, indicating an increase in supply.

Question 20

What is the difference between a money price and a relative price? When the demand and supply model predicts that the price of coffee will rise, is the model predicting that the money price rises or the relative price rises?

Accepted Answer

The answer of What is the difference between a money...

Quiz 3: Demand and Supply