micro - competitive Equilibrium, Comparative Statistics

Question 1

What is the law of supply and demand?

Answer 1

The claim that the price adjusts to bring the quantity supplied and the quantity demanded for that good into balance. Changes to underlying conditions in order to reach a new equilibrium

Question 2

What is the name for movement along the curve and a shift of the curve?

Answer 2

Movement along the curve - endogenous

Shift of the curve - exogenous

Question 3

What is an endogenous change in demand caused by?

Answer 3

This would be caused by a change in price in the product.

Question 4

What are two reasons for an exogenous change in demand?

Answer 4

Exogenous changes exclude price.

1. Price of related goods - complimentary which is directly proportional or substitutes that are indirectly proportional
2. Income - as income increases the wtp and demand for the good increases with the number of buyers

Question 5

What causes an exogenous change in supply?

Answer 5

This is dependent on a determinant other than price for example: input prices, technology, expectation, number of sellers.

1. Agricultural issues
2. Wars (political)

Question 6

What happens to price and quanitity when :
a) increase in demand + increase in supply
b) decrease in demand + decrease in supply
c) decrease in supply + no change in demand
d)increase in demand + no change in supply

Answer 6

a) P = ambiguous , Q = increase
b) P = ambiguous , Q decrease
c) P = increase , Q = decrease
d) P = increase , Q = inncrease