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

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Question 21

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Orange juice drinkers want to consume more orange juice at a lower price.Which of the following events would have this effect?

A) a decrease in the price of orange juice processing
B) an increase in the cost of fertilizer used for orange groves
C) a decrease in income, assuming orange juice is a normal good
D) a decrease in the population

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Question 22

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The following appeared in a Florida newspaper a week after a hurricane hit the state."Floridians are relieved that the storm produced no fatalities but homeowners face weeks,if not months,of rebuilding.Matters are made worse by the soaring prices of plywood and other building materials that always follow in a hurricane's path.Complaints of profiteering and price gouging have not deterred firms from raising their prices by over 100 percent." Which of the following offers the best explanation for the price increases referred to in the article?

A) The hurricane reduced the number of suppliers of building materials.
B) The hurricane created an artificial shortage of building materials.
C) The hurricane caused an increase in the demand for building materials.
D) There was a reduction in supply as firms shipped plywood and other materials to locations not affected by the storm.

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Question 23

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Figure 3-1 -Refer to Figure 3-1.An increase in the expected future price of the product would be represented by a movement from

A supply schedule

The popularity of digital cameras has enticed large discount stores like Wal-Mart and Costco to offer digital photo printing services.How does this affect the digital photo printing market?

Draw a demand curve and label it D1.On the graph,illustrate an increase in demand and a decrease in demand,and label the curves D2 and D3,respectively.Starting on demand curve D₁,explain the shift that would result from each of the following events: a.a decrease in income and the good is a normal good b.a decrease in income and the good is an inferior good c.an increase in the price of a substitute good d.an increase in the price of a complementary good e.a decrease in the taste for the good f.an increase in population g.a decrease in the expected future price of the good

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

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 D₁ and 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?

For each of the following pairs of products state which are complements,which are substitutes,and which are unrelated. a.Digital camera and memory stick b.7Up and Mountain Dew c.Swimsuits and flip-flops d.Tylenol and cat food e.Photocopier and paper

Assume that the demand curve for MP3 players shifts to the right and the supply curve for MP3 players shift to the left,but the supply curve shifts more than the demand 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 bicycle helmets.Which panel best describes what happens in this market if there is a substantial increase in the price of bicycles?

Table 3-4 $\begin{array} { | c | c | c | c | c | } \begin{array} { c } \text { Cashews } \\\text { Priceper lb. } \\\text { (dollars) }\end{array} & \begin{array} { c } \text { Jordy's } \\\text { Quantity } \\\text { Demanded } \\\text { (lbs) }\end{array} & \begin{array} { c } \text { Amy's } \\\text { Quantity } \\\text { Demanded } \\\text { (lbs) }\end{array} & \begin{array} { c } \text { Rest af } \\\text { Market } \\\text { Quantity } \\\text { Demanded } \\\text { (lbs) }\end{array} & \begin{array} { c } \text { Market } \\\text { Quantity } \\\text { Demanded } \\\text { (lbs) }\end{array} \\\hline \$ 10 & 1 & 1 & 50 & \\\hline 8 & 2 & 3 & 70 & \\\hline 6 & 3 & 5 & 95 & \\\hline 4 & 5 & 9 & 128 & \\\hline 2 & 8 & 14 & 156 & \\\hline\end{array}$ -Refer to Table 3-4.The table above shows the demand schedules for cashews of two individuals (Jordy and Amy) and the rest of the market.At a price of $10,the quantity demanded in the market would be

If the demand for a product increases and the supply of the same product increases,the equilibrium price will increase.

A shortage occurs when the market price is lower than the equilibrium price.

At market equilibrium

If the price of music downloads was to decrease,then

In 2004,hurricanes destroyed a large portion of Florida's grapefruit crop.How did this affect the market price and market quantity of grapefruit?

The demand for soft drinks in the United States has been ________ while the global demand has been ________.

Competitive market equilibrium is a market equilibrium with many buyers and sellers.