CH 3 & 4 HW

Question 1

The law of demand posits _____ relationship between the quantity demanded of a good and its​ price, other things being equal.

The law of _____ applies when other​ things, such as income and the prices of all other goods and​ services, are held constant. We measure the demand schedule in terms of a time dimension and in constant-quality units.

The _____ curve is derived by summing the quantity demanded by individuals at each price.

Answer 1

an inverse

demand

market demand

Question 2

Consider the following cases.

a. If the price of bacon​ rises, and as a result the demand for sausage​ increases, this implies that these two goods are _____.
b. If the price of tennis racquets​ falls, and as a result the demand for tennis balls _____ ​, this implies that these two goods are complements LOADING….
c. If the price of coffee​ rises, and as a result the demand for sugar​ falls, this implies that these two goods are _____
d. If the price of automobiles _____​, and as a result the demand for motorbikes​ falls, this implies that these two goods are substitutes LOADING….

Answer 2

substitutes

increases

complements

falls

Question 3

Identify which of the following would generate an increase in the market demand for tablet​ devices, which are a normal good.

I. A decrease in the incomes of consumers of tablet devices.

II. An increase in the price of ultrathin​ computers, which are substitutes.

III. An increase in the price of online​ apps, which are complements.

IV. An increase in the number of consumers in the market for tablet devices.

Answer 3

both II and IV

Question 4

Demand curves are drawn with determinants other than the price of the good held constant. These other​ determinants, called ceteris paribus​ conditions, are​ (1)
_____, ​(2) _____​, ​(3) _____​, ​(4) _____​, and​ (5) _____

A change in demand comes about only because of a change in the _____ conditions of demand. This change in demand is a shift in the demand curve to the left or to the right.

A change in the quantity demanded comes about when there is a change in the price of the good​ (other things held​ constant). Such a change in quantity demanded involves a _____ a given demand curve.

Answer 4

1. income
2. tastes and preferences
3. prices of related goods
4. expectations about future prices and incomes
5. the number of potential buyers in the market
   at any given price. If any one of these determinants​
   changes, the demand curve will shift to the right or to
   the left.

ceteris paribus

movement along

Question 5

The law of supply states that there is a positive relationship between the price and the quantity supplied.
​
Thus, as the price increases​, _____

According to the law of​ supply, as the price of the good increases​, it causes

Answer 5

the quantity produced by firms increases.

a movement upward along the supply curve.

Question 6

The law of supply states that there is a positive
relationship between the price and the quantity supplied
.
​Thus, as the price​ increases, the

According to the law of​ supply, as the price of the good​ increases, it causes a

Answer 6

quantity supplied by firms increases

movement upward along the supply curve.

Question 7

There is normally _____ relationship between price and quantity of a good​ supplied, other things held constant.

The _____ curve normally shows a direct relationship between price and quantity supplied.

The _____ curve is obtained by horizontally adding individual supply curves in the market.

Answer 7

a direct

supply

market supply

Question 8

Which of the following will cause an outward​ (rightward) shift in​ supply?

Answer 8

A technological improvement.

Question 9

Suppose that paper is necessary to produce books. If the price of paper rises​, the supply curve of

Answer 9

books shifts to the left

Question 10

A change in a​ good’s own price leads to a change in​ supply, which shifts the supply curve. (T / F)

Whenever there is a change in a ceteris paribus condition there will be a change in​ ________, which is represented by a​ ________.

Answer 10

False

supply; shift in the entire supply curve

Question 11

At the market price of​ $8, the quantity demanded is
_____ ​units, and quantity supplied is _____ units.

At this​ price, _____ exists.

At a market price of​ $4, _____ now exists.

The market equilibrium exists at a price of ​$ _____.

In​ equilibrium, the quantity demanded by consumers is
_____ to the quantity supplied by producers.

Answer 11

20; 60

a surplus

a shortage

6

equal to

Question 12

The following table gives the demand and supply schedules for gizmos.

Price Quantity Quantity
Demanded Supplied
​$35 190 280
​$30 210 270
​$25 230 260
​$20 250 250
​$15 270 240

The equilibrium price in this market is ​$ _____.

The equilibrium quantity in this market is _____ units.

If the price in this market was ​$30​, there would be a
_____ of _____units.

Answer 12

20

250

surplus; 60

Question 13

Shortages and scarcity are the same thing.

A shortage occurs when quantity demanded is​ ________ than quantity supplied at a price​ ________ the market clearing price.

Answer 13

False

​greater; below

Question 14

In a price​ system,

Answer 14

relative prices change constantly to reflect changes in supply and demand.

Question 15

A key feature of the _____ system is _____ exchange​, which involves trades between individuals that they both perceive to raise their​ well-being.

_____, also known as​ intermediaries, specialize in linking ultimate sellers and buyers and lowering these​ parties’
_____ costs.

Answer 15

price; voluntary

Middlemen; transaction

Question 16

Suppose that you are investigating the market for aluminum. The price of steel​, a substitute​ good, has decreased. Which of the following would best describe the market reaction to this​ event?

Answer 16

The demand for aluminum ​decreases, which creates a surplus of aluminum​, causing the price of aluminum to decrease.

Question 17

Other things remaining​ equal, a decrease in the world oil supply like those that occurred in​ 1973-74 and 1979 would

Answer 17

increase the price of airline travel and decrease its equilibrium quantity.

Question 18

If demand increases while supply remains​ unchanged, the equilibrium price of the product will​ ________ and the equilibrium quantity will​ ________.

Answer 18

​​increase; increase

Question 19

Given the existence of relative​ scarcity, resources can be rationed by

Answer 19

All of the above

Question 20

The following table depicts the quantity demanded and quantity supplied of​ one-bedroom apartments in a small college town.

Monthly Quantity Quantity
Demanded Supplied
​$400 ​3,000 1,600
​$450 2,500 1,800
​$500 2,000 2,000
​$550 1,500 2,200
​$600 1,000 ​2,400

The market price will be ​$_____ and the equilibrium quantity will be _____ apartments.

If this town imposes a rent control of​ $450 per​ month, how many apartments are​ rented? _____.

Answer 20

500

2000

1800

Question 21

Many U.S.​ cities, especially those with large populations of​ renters, have rent controls.

Suppose that New York City sets a rent control of ​$400 per month on​ one-bedroom apartments. The graph on the right shows this situation.

The rent control will create a ______ of apartments equal to _____.

The price of apartments would be ​$ _____ if there was no rent control. With the rent​ control, the implicit or black market price is likely to be _____.

Answer 21

shortage; (Qd - Qs)

700; around $1000

Question 22

A black market is a market in which a​ price-controlled good is sold at an illegally high price. (T / F)

As long as a price ceiling is​ ________ the market clearing​ price, imposing a price ceiling creates a​ ________.

Answer 22

True

below; shortage

Question 23

In advance of the recent increase in the U.S. minimum wage​ rate, the government of the state of Arizona decided to boost its own minimum wage by​ $1.60 per hour. This pushed the wage rate earned by Arizona teenagers above the equilibrium wage rate in the teen labor market. What is the predicted effect of this action by​ Arizona’s government on each of the​ following?

The quantity of labor supplied by Arizona teenagers will
_____.

The quantity of labor demanded by employers of Arizona teenagers will _____.

The number of unemployed Arizona teenagers in this city will _____

Answer 23

increase

decrease

increase

Question 24

What is the economic effect of price​ floors?

Answer 24

Surpluse

Question 25

The accompanying graph depicts the market for unskilled labor. With the market initially in​ equilibrium, let a minimum wage be set at​ $8 per hour. The amount of unemployment is now

Answer 25

​40,000 hours of labor.