Question 1

In a competitive market what happens to the quantity supplied when the supply curve shifts right?

Accepted Answer

When the supply curve shifts right, it means that suppliers are willing to produce and sell more of the good at each price level. This results in an increase in the quantity supplied, as they are now able to produce and sell more at each price point. Therefore, the answer is A, it increases.

Question 2

Attempts are being made to use agricultural produce, such as potatoes, to create a biodegradable plastic.If these attempts are successful, what will happen to the equilibrium price and quantity of potatoes?

Accepted Answer

If agricultural produce like potatoes is used to create biodegradable plastic, the demand for potatoes will increase. This increased demand will likely lead to a higher equilibrium price and quantity, as suppliers respond to the higher prices by bringing more potatoes to market.

Question 3

Exhibit 4-9
 
-Refer to the exhibit.What does a shift from demand curve D to D' illustrate?

Accepted Answer

A shift from demand curve D to D' illustrates an increase in demand because at any given price, the quantity demanded has increased. This shift could be caused by factors such as a rise in consumer income, a decrease in the price of substitutes, or an increase in the popularity of the product.

Question 4

What is the effect of a decrease in the price of potato chips on the market for pretzels?

Accepted Answer

A decrease in the price of potato chips (a substitute for pretzels) would likely lead to a decrease in demand for pretzels as consumers switch to the now cheaper potato chips. This decrease in demand for pretzels would cause both the equilibrium price and quantity of pretzels to fall.

Question 5

Assume coffee is a substitute for tea.Suppose the tea harvest is bad this year.What may happen in the coffee market?

Accepted Answer

If the tea harvest is bad and the supply of tea decreases, the demand for tea will rise, and as coffee is a substitute for tea, consumers who cannot find enough tea may start buying more coffee. This will increase the demand for coffee and could lead to an increase in its price. Therefore, the demand for coffee may increase.

Question 6

The market for chewing gum is competitive with a current price of 50 cents per pack and quantity of 100,000 packs.Which event would lead to a new equilibrium price of 40 cents and a new equilibrium quantity of 80,000 packs?

Accepted Answer

A decrease in the number of young people in the population would likely reduce the demand for chewing gum, leading to a lower equilibrium price and quantity.

Question 7

Suppose the demand for bicycles increases.All things being equal, what will happen in this market?

Accepted Answer

When demand for bicycles increases, suppliers will respond by increasing the quantity supplied to meet the higher demand, assuming price and other factors remain constant. This does not directly state what happens to the equilibrium price or quantity, but an increase in demand typically leads to an increase in quantity supplied in the market.

Question 8

For a given supply curve, what will an increase in demand typically do to price and quantity?

Accepted Answer

An increase in demand will shift the demand curve to the right, creating a new intersection point with the supply curve at a higher equilibrium price and quantity. Therefore, both quantity and price will increase.

Question 9

What will be the result of a decrease in demand?

Accepted Answer

A decrease in demand means that there is a lower willingness or ability of consumers to buy a certain product or service. This will lead to a surplus of that product or service in the market, putting pressure on producers to lower their prices in order to clear the excess supply. As a result, equilibrium price and quantity will decrease.

Question 10

In a competitive market what happens to price when there is a decrease in the supply curve?

Accepted Answer

When there is a decrease in the supply curve, the supply of goods or services is reduced. This leads to an increase in the equilibrium price as demand remains constant or increases. This is because consumers are willing to pay more to buy the same amount of goods or services due to the reduced supply. Therefore, option A is the correct answer.

Question 11

Velcro has become more and more popular for a variety of uses, including as fasteners for shoes.What should happen to the equilibrium price and quantity for shoelaces as a result?

Accepted Answer

As Velcro becomes more popular for shoes, the demand for shoelaces will decrease, leading to a lower equilibrium price and quantity for shoelaces.

Question 12

Exhibit 4-9
 
-Refer to the exhibit.Which of the following would cause a shift of demand from D' to D?

Accepted Answer

A decline in consumers' incomes if it is a normal good would cause a shift of demand from D' to D. This is because if consumers' incomes decline, they are likely to purchase less of the good, thereby reducing the overall demand for the good.

Question 13

In a competitive market what happens to the price when the supply curve shifts right?

Accepted Answer

When the supply curve shifts right, it means that there is an increase in the quantity of goods supplied at every price level. As a result, the market price tends to decrease to balance the increased supply with the existing demand. Therefore, the best choice is B, which states that the price decreases.

Question 14

In a competitive market what happens to the quantity supplied when the supply curve shifts left?

Accepted Answer

When the supply curve shifts left, it means that the suppliers are willing to supply less quantity at the same price. This reduces the overall quantity supplied, resulting in a decrease in quantity supplied.

Question 15

Suppose that the price of a ticket to see a movie at the theatre increases, and assume the substitute product is an online movie rental at home.Other things equal, what is the most likely effect in the market for online movie rentals?

Accepted Answer

An increase in the price of movie tickets will make going to the cinema less attractive and increase the demand for substitute products such as online movie rentals at home. Therefore, option B - an increase in demand for online movie rentals is the most likely effect in the market.

Question 16

The market for chewing gum is competitive with a current price of 50 cents per pack and a quantity of 100,000 packs per day.Which event would lead to a new equilibrium price of 75 cents and a new equilibrium quantity of 125,000?

Accepted Answer

An increase in the price of other kinds of candy would make chewing gum relatively cheaper, increasing its demand. This would shift the demand curve to the right, leading to a higher equilibrium price and quantity.

Question 17

Exhibit 4-9
 
-Refer to the exhibit.Which of the following could NOT cause the shift from D to D'?

Accepted Answer

The shift from D to D' represents an increase in demand. A decrease in the price of the good in question (C) would not cause the demand curve to shift; instead, it would cause movement along the demand curve. Changes in demand are caused by factors other than the price of the good itself, such as changes in consumer preferences, income, prices of related goods (complements and substitutes), and the number of consumers.

Question 18

What would an increase in demand for chocolate chips usually result in?

Accepted Answer

An increase in demand for chocolate chips would lead to a higher equilibrium price (as consumers are willing to pay more for the same quantity) and a higher equilibrium quantity (as producers would be willing to produce more to meet the higher demand at the higher price). Thus, the correct answer is D.

Question 19

Which of the following would cause both the equilibrium price and equilibrium quantity of cookies to decrease?

Accepted Answer

A rise in the price of milk, which is a complement to cookies, would lead to a decrease in the demand for cookies. This decrease in demand would cause both the equilibrium price and equilibrium quantity of cookies to decrease.

Question 20

Assume coffee is a substitute for tea.Suppose the tea harvest is bad this year.What will happen in the market for coffee?

Accepted Answer

Since tea and coffee are substitutes, a bad tea harvest will lead to an increase in demand for coffee, causing both the price and quantity to rise in the market for coffee.

Quiz 4: Demand, Supply, and Markets