Question 1

During the 1990s positive technological change in the production of chicken caused the price of chicken to fall.Holding everything else constant,how would this affect the market for pork (a substitute for chicken)?
A)The supply of pork would increase and the equilibrium price of pork would decrease.
B)The demand for pork would decrease and the equilibrium price of pork would decrease.
C)The demand for pork would increase because consumers could afford to buy more chicken and pork.
D)The demand for pork would decrease and the equilibrium price of pork would increase.

Accepted Answer

When the price of chicken falls due to positive technological changes, consumers are likely to substitute chicken for pork, leading to a decrease in the demand for pork. As demand decreases, the equilibrium price of pork would also decrease.

Question 2

"The price of digital cameras fell because of improvements in production technology.As a result,the demand for non-digital cameras decreased.This caused the price of non-digital cameras to fall; as the price of non-digital cameras fell the demand for non-digital cameras decreased even further." Evaluate this statement.
A)The statement is false because the demand for non-digital cameras would increase as the price of digital cameras fell.
B)The statement is false.A decrease in the price of digital cameras would decrease the demand for non-digital cameras,but a decrease in the price of non-digital cameras would not cause the demand for non-digital cameras to decrease.
C)The statement is false because it confuses the law of demand with the law of supply.
D)The statement is false because digital camera producers would not reduce their prices as a result of improvements in technology; doing so would reduce their profits.

Accepted Answer

The statement is false because as the price of digital cameras falls, the demand for non-digital cameras would decrease. However, a decrease in the price of non-digital cameras would not cause the demand for non-digital cameras to decrease further. This is because the initial decrease in digital camera prices would have already affected the demand for non-digital cameras. Additionally, the statement does not confuse the law of demand with the law of supply, nor does it make any assumptions about the pricing strategies of digital camera producers.

Question 3

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D₂ and S₁ (point C).If the price of motorcycle side cars (a complement to motorcycles)decreases,and the wages of motorcycle workers increase,how will the equilibrium point change? A)The equilibrium point will move from C to E. B)The equilibrium point will move from C to B. C)The equilibrium point will move from C to A. D)The equilibrium will first move from C to A,then return to C.

Accepted Answer

A decrease in the price of motorcycle side cars (a complement to motorcycles) will increase the demand for motorcycles, shifting the demand curve to the right from D₂ to DS1U2B12S1U2B0. An increase in the wages of motorcycle workers will increase the cost of production and shift the supply curve to the left from S₁ to SS1U0B11S1U0B0. These two changes will cause the equilibrium point to move from point C to point B.

Question 4

A decrease in input costs in the production of LCD televisions caused the price of LCD televisions to decrease.Holding everything else constant,how would this affect the market for video game consoles (a complement to LCD televisions)?
A)The supply of video game consoles would increase and the equilibrium price of video game consoles would decrease.
B)The demand for video game consoles would decrease and the equilibrium price of video game consoles would decrease.
C)The demand for video game consoles would decrease because consumers could afford to buy fewer LCD televisions and video game consoles.
D)The demand for video game consoles would increase and the equilibrium price of video game consoles would increase.

Accepted Answer

A decrease in the input costs of LCD televisions causes a decrease in their price, which will increase the quantity demanded of LCD televisions. Since video game consoles are a complement to LCD televisions, an increase in the quantity demanded of LCD televisions will also increase the demand for video game consoles. Therefore, the demand for video game consoles would increase and the equilibrium price of video game consoles would increase.

Question 5

Figure 3-7 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for frozen yogurt.Which panel describes what happens in the market for frozen yogurt when the price of ice cream,a substitute product,increases?
A)Panel (a)
B)Panel (b)
C)Panel (c)
D)Panel (d)

Accepted Answer

Panel (c) illustrates an increase in demand for frozen yogurt, which would occur if the price of a substitute product like ice cream increases. This is because consumers would likely switch to frozen yogurt as ice cream becomes more expensive, shifting the demand curve for frozen yogurt to the right.

Question 6

Figure 3-7 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for ramen noodles,an inferior good.Which panel describes what happens in this market as a result of an increase in income?
A)Panel (a)
B)Panel (b)
C)Panel (c)
D)Panel (d)

Accepted Answer

The answer of Figure 3-7 
-Refer to Figure 3-7.Assume that...

Question 7

Assume that both the demand curve and the supply curve for DVD players shift to the left but the demand curve shifts more than the supply curve.As a result
A)both the equilibrium price and quantity of DVD players will decrease.
B)the equilibrium price of DVD players will decrease; the equilibrium quantity may increase or decrease.
C)the equilibrium price of DVD players may increase or decrease; the equilibrium quantity will decrease.
D)the equilibrium price of DVD players will increase; the equilibrium quantity may increase or decrease.

Accepted Answer

The answer of Assume that both the demand curve and...

Question 8

Figure 3-7 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for coffee.What happens in this market if buyers expect the price of coffee to rise?
A)Panel (a)
B)Panel (b)
C)Panel (c)
D)Panel (d)

Accepted Answer

In anticipation of a price increase, buyers are likely to purchase more coffee now to avoid higher prices later, shifting the demand curve to the right, as depicted in Panel (c). This shift represents an increase in demand due to the expectation of future price increases.

Question 9

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D₁ and S₁ (point A).If the price of motorcycle engines increases,and the wages of motorcycle workers increase,how will the equilibrium point change? A)The equilibrium point will move from A to E. B)The equilibrium point will move from A to B. C)The equilibrium point will move from A to C. D)The equilibrium will first move from A to B,then return to A.

Accepted Answer

The answer of Figure 3-8 
-Refer to Figure 3-8.The graph...

Question 10

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D₁and S₂ (point B).If there is an increase in number of companies producing motorcycles and a decrease in income (assume motorcycles are a normal good),the equilibrium could move to which point? A)A B)B C)C D)E

Accepted Answer

An increase in the number of companies producing motorcycles would shift the supply curve to the right (SS2U1B0), while a decrease in income would shift the demand curve to the left (DS2U1B12). The new equilibrium would be at the intersection of DS2U1B12 and SS2U1B0, which is point C.

Question 11

Assume that both the demand curve and the supply curve for DVD players shift to the left but the supply curve shifts more than the demand curve.As a result
A)both the equilibrium price and quantity of DVD players will decrease.
B)the equilibrium price of DVD players will decrease; the equilibrium quantity may increase or decrease.
C)the equilibrium price of DVD players may increase or decrease; the equilibrium quantity will increase.
D)the equilibrium price of DVD players will increase; the equilibrium quantity will decrease.

Accepted Answer

The answer of Assume that both the demand curve and...

Question 12

Which of the following statements is true?
A)An increase in demand causes an increase in equilibrium price; the increase in price causes supply to increase.
B)A decrease in supply causes equilibrium price to rise; the increase in price then results in a decrease in quantity demanded.
C)If both demand and supply decrease,there must be a decrease in equilibrium price; equilibrium quantity may either increase or decrease.
D)If demand increases and supply decreases one cannot determine if equilibrium price will increase or decrease without knowing which change is greater.

Accepted Answer

The answer of Which of the following statements is true?
A)An...

Question 13

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D₂ and S₁ (point C).Which of the following changes would cause the equilibrium to change to point B? A)A positive change in the technology used to produce motorcycles and decrease in the price of motorcycle insurance,a complement to motorcycles. B)An increase in the wages of motorcycle workers and a decrease in the price of motorcycle insurance,a complement to motorcycles. C)An increase in the number of motorcycle producers and an increase in the number of consumers who prefer riding motorcycles. D)An increase in the wages of motorcycle workers and an increase in the price of motorcycle insurance,a complement to motorcycles.

Accepted Answer

The answer of Figure 3-8 
-Refer to Figure 3-8.The graph...

Question 14

Figure 3-7 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for tuna.Which panel best describes what happens in this market when there is a decrease in the productivity of commercial fishermen?
A)Panel (a)
B)Panel (b)
C)Panel (c)
D)Panel (d)

Accepted Answer

Panel (b) shows a decrease in the quantity supplied (shift of the supply curve to the left) due to a decrease in the productivity of commercial fishermen. This results in a higher equilibrium price and a lower equilibrium quantity in the market.

Question 15

Figure 3-7 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for mustard and that bratwurst and mustard are complements.What panel describes what happens in this market when the price of bratwurst falls?
A)Panel (a)
B)Panel (b)
C)Panel (c)
D)Panel (d)

Accepted Answer

The answer of Figure 3-7 
-Refer to Figure 3-7.Assume that...

Question 16

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D₁ and S₁ (point A).If there is a surplus of motorcycles how will the equilibrium point change? A)The equilibrium point will move from A to B. B)The equilibrium point will move from A to C. C)There will be no change in the equilibrium point. D)The equilibrium point will move from A to E.

Accepted Answer

With a technological improvement and an increase in the number of buyers, the supply curve will shift to the right (from SS1U1B12S1U1B0 to SS1U2B12S1U2B0) and the demand curve will shift up (from DS1U1B12 to DS2U1B12). As a result, the new equilibrium point will be at the intersection of DS2U2B12 and SS1U2B12S1U2B0, which is point C. Therefore, the equilibrium point will move from E to C.

Question 17

Assume that the demand curve for DVD players shifts to the left and the supply curve for DVD players shifts to the right,but the supply curve shifts less than the demand curve.As a result
A)both the equilibrium price and quantity of DVD players will decrease.
B)the equilibrium price of DVD players will decrease; the equilibrium quantity may increase or decrease.
C)the equilibrium price of DVD players may increase or decrease; the equilibrium quantity will increase.
D)the equilibrium price of DVD players will decrease; the equilibrium quantity will increase.

Accepted Answer

When the demand curve shifts to the left, it indicates a decrease in demand, and when the supply curve shifts to the right, it indicates an increase in supply. However, since the demand curve shifts more than the supply curve, the dominant effect is a decrease in both the equilibrium price and quantity of DVD players.

Question 18

Assume that the demand curve for DVD players shifts to the left and the supply curve for DVD players shifts to the right,but the supply curve shifts more than the demand curve.As a result
A)both the equilibrium price and quantity of DVD players will decrease.
B)the equilibrium price of DVD players will decrease; the equilibrium quantity may increase or decrease.
C)the equilibrium price of DVD players may increase or decrease; the equilibrium quantity will increase.
D)the equilibrium price of DVD players will decrease; the equilibrium quantity will increase.

Accepted Answer

When the demand curve shifts to the left, it indicates a decrease in demand, and when the supply curve shifts to the right more significantly, it indicates an increase in supply. The larger shift in supply compared to demand will lead to a decrease in the equilibrium price due to excess supply. The equilibrium quantity will increase because the increase in supply outweighs the decrease in demand.

Question 19

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D₂ and S₂ (point A)The equilibrium point will move from E to A. B)The equilibrium point will move from E to B. C)The equilibrium point will move from E to C. D)The equilibrium point will remain at E. E).If the technology to produce motorcycles improves and the number of buyers increases,how will the equilibrium point change?

Accepted Answer

The answer of Figure 3-8 
-Refer to Figure 3-8.The graph...

Question 20

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D₁and S₁ (point A).If there is an increase in the wages of motorcycle workers and an increase in the price of motorcycle insurance,a complement to motorcycles,the equilibrium could move to which point? A)A B)B C)C D)E

Accepted Answer

The answer of Figure 3-8 
-Refer to Figure 3-8.The graph...

Quiz 3: Where Prices Come From: the Interaction of Demand and Supply

During the 1990s positive technological change in the production of chicken caused the price of chicken to fall.Holding everything else constant,how would this affect the market for pork (a substitute for chicken) ?

A decrease in input costs in the production of LCD televisions caused the price of LCD televisions to decrease.Holding everything else constant,how would this affect the market for video game consoles (a complement to LCD televisions) ?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for frozen yogurt.Which panel describes what happens in the market for frozen yogurt when the price of ice cream,a substitute product,increases?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for ramen noodles,an inferior good.Which panel describes what happens in this market as a result of an increase in income?

Assume that both the demand curve and the supply curve for DVD players shift to the left but the demand curve shifts more than the supply curve.As a result

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for coffee.What happens in this market if buyers expect the price of coffee to rise?

Assume that both the demand curve and the supply curve for DVD players shift to the left but the supply curve shifts more than the demand curve.As a result

Which of the following statements is true?

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D₂ and S₁ (point C) .Which of the following changes would cause the equilibrium to change to point B?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for tuna.Which panel best describes what happens in this market when there is a decrease in the productivity of commercial fishermen?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for mustard and that bratwurst and mustard are complements.What panel describes what happens in this market when the price of bratwurst falls?

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D₁ and S₁ (point A) .If there is a surplus of motorcycles how will the equilibrium point change?

Assume that the demand curve for DVD players shifts to the left and the supply curve for DVD players shifts to the right,but the supply curve shifts less than the demand curve.As a result

Assume that the demand curve for DVD players shifts to the left and the supply curve for DVD players shifts to the right,but the supply curve shifts more than the demand curve.As a result

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D₂ and S₂ (point

Quiz 3: Where Prices Come From: the Interaction of Demand and Supply

During the 1990s positive technological change in the production of chicken caused the price of chicken to fall.Holding everything else constant,how would this affect the market for pork (a substitute for chicken) ?

A decrease in input costs in the production of LCD televisions caused the price of LCD televisions to decrease.Holding everything else constant,how would this affect the market for video game consoles (a complement to LCD televisions) ?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for frozen yogurt.Which panel describes what happens in the market for frozen yogurt when the price of ice cream,a substitute product,increases?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for ramen noodles,an inferior good.Which panel describes what happens in this market as a result of an increase in income?

Assume that both the demand curve and the supply curve for DVD players shift to the left but the demand curve shifts more than the supply curve.As a result

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for coffee.What happens in this market if buyers expect the price of coffee to rise?

Assume that both the demand curve and the supply curve for DVD players shift to the left but the supply curve shifts more than the demand curve.As a result

Which of the following statements is true?

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D2 and S1 (point C) .Which of the following changes would cause the equilibrium to change to point B?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for tuna.Which panel best describes what happens in this market when there is a decrease in the productivity of commercial fishermen?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for mustard and that bratwurst and mustard are complements.What panel describes what happens in this market when the price of bratwurst falls?

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D1 and S1 (point A) .If there is a surplus of motorcycles how will the equilibrium point change?

Assume that the demand curve for DVD players shifts to the left and the supply curve for DVD players shifts to the right,but the supply curve shifts less than the demand curve.As a result

Assume that the demand curve for DVD players shifts to the left and the supply curve for DVD players shifts to the right,but the supply curve shifts more than the demand curve.As a result

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D2 and S2 (point

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D₂ and S₁ (point C) .Which of the following changes would cause the equilibrium to change to point B?

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D₁ and S₁ (point A) .If there is a surplus of motorcycles how will the equilibrium point change?

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D₂ and S₂ (point