MGEA02H3 Lecture 3: Demand and Supply

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cerisegiraffe538

4 Nov 2015

School

UTSC

Department

Economics for Management Studies

Course

MGEA02H3

Professor

Gordon Cleveland

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MGEA02H3 Full Course Notes

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Mgea02 lecture 3 demand and supply in a competitive market. Demand curve tells us what would happen if the prices were at any value. Supply curve tells us the prices the suppliers are willing to sell for. When demand = supply the market is in equilibrium. Demand has a negative slope because as prices decrease consumers are willing to buy more. Supply has a positive slope because as the marginal cost is positive. Also as the price increases suppliers are willing to supply more. Supply in the short run is with existing firs only using their existing productive capacity. Supply in the long run is less steeply sloped, more elastic. Demand and supply can have a zero slope. The behaviour of buyers is consistent with the behaviour with sellers. The main mechanism into bringing markets into equilibrium: by encouraging/discouraging demand, by encouraging/discouraging supply. Set of institutional arrangements that bring buyers and sellers together to negotiate terms of exchanging goods/services.

Related Questions

Who bears the primary costs of a rent control program?

landlords

renters that get rent-controlled apartments

taxpayers

the wealthy

Assume the demand for sushi is Qd = 180 - 3P, where Qd is quantity demanded and P = price in dollars. The supply of sushi is Qs = 80 + 5P, where Qs is quantity supplied (and P is, again, price in dollars). A price of $20 would result in:

	A.	Excess supply of 60
	B.	Excess supply of 120
	C.	Excess supply of 140
	D.	Excess demand of 140

US agricultural price supports are politically popular because

They have no adverse impacts

The US would have food shortages without them

The benefits accrue to a large number of voters and the costs are paid by a small number of voters

The costs are spread out among millions of people

	A.	$15.50
	B.	$12.50
	C.	$10
	D.	$15

Price floors and ceiling prices:

cause the supply and demand curves to shift until equilibrium is established.

both cause surpluses.

interfere with the rationing function of prices.

A change in the price of a good leads to a change in ________, which leads to a ___________

quantity supplied; shift of the supply curve

supply; shift of the supply curve

quantity supplied; movement along the supply curve

When the supply of a product increases, this implies that

the price of the product first declined

more will be purchased at the same price

producers will be willing to accept a lower price for each unit sold

demand for the good must have increased

producers will offer less for sale at each possible price

If there is a excess demand for product X:

fewer resources will be allocated to the production of this good.

the price of the product will rise.

the supply curve will shift to the left and the demand curve to the right, eliminating the shortage.

the price of the product will decline.

Which of the following will occur when there is a simultaneous decrease in demand and a decrease in supply?

B and D both necessarily occur

An increase in equilibrium quantity

A and C both necessarily occur

An increase in price

A and D both necessarily occur

A decrease in price

A decrease in equilibrium quantity

Velcro is becoming 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?

Both price and quantity should decrease.

Price should increase and quantity decrease.

Both price and quantity should increase.

Price should decrease and quantity increase.

Nothing.

If the government imposes a ceiling price on apartment rents, we would expect to observe all of the following except one. Which is the exception?

	A.	conversion of some apartment complexes to condos
	B.	a shortage
	C.	an increase in the number of new apartment complexes being built
	D.	lower maintenance of existing apartments
	E.	long waiting lists for apartment seekers

supply; movement along the supply curve

both cause shortages.

chocolatebadger640

When demand for a good is very elastic, revenue ________ when the price falls.

(2)

An elasticity measure less than one means that demand is __________.

(3)

An elasticity measure greater than one means that demand is __________.

(4)

The Latin expression ceteris paribus means

	having made all other necessary changes.
	holding constant all other variables.
	assuming all households have similar incomes.
	given the level of income in the economy.

(5)

A variable measured in terms of money is called a ____________________.

	real variable
	nominal variable
	macroeconomic variable
	microeconomic variable

(6)

Which of the following is true about the importance of money in economics?

	Money is important in both macroeconomics and microeconomics.
	Money is important in macroeconomics but not microeconomics.
	Money is important in microeconomics but not macroeconomics.
	Money is not important in either microeconomics or macroeconomics.

(7)

What is the difference between normative and positive economics?

	Positive economics is descriptive and predictive; normative economics is prescriptive.
	Positive economics highlights the positive aspects of the economy; normative economics highlights the average features.
	Positive economics studies the actions of individuals; normative economics studies the actions of households.
	Positive economics is an applied social science; normative economics is a theoretical social science.

(8)

The slope of the demand curve is negative because

	the quantity of a good demanded decreases as income declines.
	the quantity of a good demanded increases as income declines.
	the quantity of a good demanded increases as the price declines.
	the quantity of a good demanded decreases as the price declines.

(9)

What is the result of an increase in the price of bread, a normal good?

	The demand curve shifts to the right.
	The demand curve shifts to the left.
	The quantity demanded increases.
	The quantity demanded decreases.

(10)

What is the effect on demand for bread when the price of bagels, a substitute for bread, rises?

	The demand curve for bread shifts to the right.
	The demand curve for bread shifts to the left.
	The quantity of bread demanded increases.
	The quantity of bread demanded decreases.

(11)

Which of the following would cause the supply curve for bread to shift inward?

	An increase in the price of bread
	An increase in the price of bagels
	A decrease in the price of bread
	An increase in the price of flour

(12)

An improvement in technology shifts the supply curve outward because

	at every price, firms find producing the good to be more profitable.
	the price of the good increases.
	at every price, firms find producing the good to be less profitable.
	the price of the good decreases.

(13)

Which of the following factors does not affect how much bread a baker is willing to produce?

	The price of bread
	The demand for bread
	The cost of inputs
	Technology

(14)

How do expectations of prices affect how much of a good producers are willing to sell?

	Expectations of prices affect only demand, not supply.
	Actual prices, not expectations of prices, affect supply.
	If producers expect prices to fall in the future, they supply less at every price.
	If producers expect prices to rise in the future, they supply less at every price.

(15)

When the price of a good is above equilibrium level,

	the quantity demanded exceeds the quantity supplied.
	the quantity supplied exceeds the quantity demanded.
	the supply curve shifts to the left.
	the supply curve shifts to the right.

(16)

At a price of P₀ in the diagram below, which of the following statements is true?

	Supply equals demand.
	There is excess demand.
	There is excess supply.
	There is scarcity.

(17)

If demand for bread increases at every price, the equilibrium price of bread will

	fall.
	rise.
	remain unchanged.
	depend on income.

(18)

If the demand for bread declines, then

	at the original equilibrium price, there is excess demand.
	at the original equilibrium price, there is excess supply.
	the supply curve shifts to the right.
	the supply curve shifts to the left.

(19)

Peanut butter and jelly are complementary goods. When the price of peanut butter rises, the demand for jelly ________ and the price of jelly ________.

	rises; falls
	rises; rises
	falls; rises
	falls; falls

(20)

The measure of elasticity that economists use is

	always a positive number.
	always a negative number.
	positive when demand is elastic and negative when demand is inelastic.
	negative when demand is elastic and positive when demand is inelastic.

(21)

Which of the following formulas is the correct expression for the slope of a line?

(22)

Graphically how would an increase in income affect the demand for hamburgers?

	The slope of the demand curve would increase.
	The slope of the demand curve would decrease.
	The demand curve would shift outward, parallel to the original demand curve.
	The demand curve would shift inward, parallel to the original demand curve.

(23)

Given the equation P = $6.00 ? $.40Q, where P is the price of the good and Q is the quantity of the good demanded, how many units will this consumer demand if the price is $3.60?

	1.44 units
	3 units
	3.6 units
	6 units

(24)

Which of the following is true about unit elasticity?

	Revenues remain unchanged when the price changes.
	Elasticity of demand increases as one moves down the demand curve.
	Elasticity of demand decreases as one moves down the demand curve.
	The elasticity of demand is greater than one at every point along the demand curve.

(25)

Which of the following could be a determinant of the quantity demanded of a good?

	The price of the good
	The price of related goods
	Income
	Expectations about the future price of the product
	All of the above

violethare488

1)The law of demand states that as the price of a good rise, _____.

A. buyers purchase more of the good because the price of a substitute has risen.

B. buyers purchase less of the good because their real income decreases with an increase in price.

C. buyers purchase more of the good because they expect prices to be even higher in the future

D. buyers purchase less of the good because they expect prices to fall in the future.

2) A movement along a demand curve can be attributed to a change in:

A. the quantity demanded of a good.

B. the demand for a good.

C. the substitution effect of consuming a good.

D. the opportunity cost of producing a good.

3) If we say that demand for a good has increased, we mean that there has been:

A. a leftward shift of the demand curve.

B. a rightward shift of the demand curve.

C. a leftward movement along the demand curve.

D. a rightward movement along the demand curve.

4) Which of the following will cause the demand curve for a normal good to shift to the right?

A. An increase in the price of a complementary good.

B. A decrease in income.

C. A decrease in the price of the good.

D. An increase in the price of a substitute good.

5)Which of the following best defines supply?

A. The amount of a good that is produced at the least possible cost, other things constant

B. The amount of a good that producers are willing and able to sell at each possible price, other things constant.

C. The amount of a good that consumers want to buy at different income levels

D. The amount of a good that producers want to sell at a fixed price

6)The market supply curve of a particular product indicates the total quantities:

A. that are actually sold during a given time period.

B. that sellers are willing to offer for sale at a fixed price.

C. that buyers are willing to purchase at alternative prices.

D. that sellers are willing and able to offer at alternative prices.

7)When quantity demanded of a good exceeds the quantity supplied at the prevailing market price, _____.

A. the demand curve shifts rightward until the surplus is eliminated

B. the market is in equilibrium.

C. the price of the good will tend to increase.

D. the price of the good will decrease

8)A shortage of textbooks is most likely to cause:

A. an increase in the price of textbooks.

B. a decrease in the supply of textbooks.

C. a decrease in the price of paper.

D. an increase in the cost of printing.

9)The most important characteristic of the equilibrium price is that it:

A. maximizes the quantity demanded.

B. clears the market, leaving neither a surplus nor a shortage.

C. minimizes the quantity demanded.

D. guarantees that producers earn the profit.

10)If both demand and supply increases in a market that is initially in equilibrium, the price will:

A. increase only if demand increases more than supply.

B. increase only if supply increases more than demand.

C. remain unchanged while quantity will increase.

D. remain unchanged while quantity will decrease.

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MGEA02H3 Lecture 3: Demand and Supply

MGEA02H3 Full Course Notes

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