ECON1101 Chapter Notes - Chapter 4: Aggregate Demand, Economic Equilibrium, Marginal Cost

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13 Oct 2018

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4. 1 demand and supply aggregation: many suppliers in the market producing same good: In order to find the supply curve for the whole market we need to sum up the two supply curves horizontally: many consumers in the market consuming same good: In order to obtain the aggregate demand for the whole market you just need to sum the demand curves horizontally. the aggregate demand and supply is the horizontal sum of the individual demand and supply curves. Excess supply: excess supply depicts a situation where the quantity supplied is larger than the quantity demanded. Sellers who are left without a buyer will find it desirable to lower the price in order to attract one (buyer). Excess demand: excess demand depicts a situation where the quantity demanded is larger than the quantity supplied. the buyers who are unable to secure the good will be willing to pay a higher price in order to get some.

Related Questions

The market demand curve

a. slopes upward.

b. is found by vertically adding the individual demand curves.

c. represents the sum of the quantities demanded by all the buyers at each price of the good.

d. represents the sum of the prices that all the buyers are willing to pay for a given quantity of the good.

When we move along a given demand curve,

all nonprice determinants of demand are held constant.

only price is held constant.

all determinants of quantity demanded are held constant.

d. income and price are held constant.

When the price of a good or service changes,

	a.	there is a movement along a given demand curve.
	b.	the demand curve shifts in the opposite direction.
	c.	the supply curve shifts in the opposite direction.
	d.	the demand curve shifts in the same direction.

1. In economics, the demand for a good refers to the amount of the good that people:
a. Will buy at alternative income levels
b. Need to achieve a minimum standard of living.
c. Will buy at various prices
d. Would like to have if the good were free
2. The term ceteris paribus means that:
a. What is for the individual is not necessarily true for the whole
b. All variables except those specified are constant
c. Everything is variable
d. No one knows which variables will change and which will remain constant.
3. When economist talk about supply, they are referring to a relationship between price received for each unit sold and the ____________________.
a. Quantity supplied
b. Demand schedule
c. Demand curve
d. Market price
4. But nearly all supply curves share a basic similarity: they slop______________.
a. Up from left to right
b. Down from left to right
c. Up from right to left
d. Down from right to left
5. The nature of demand indicates that as the price of a good increases:
a. Suppliers wish to sell less of it.
b. Buyers desire to purchase less of it
c. More of it is desired
d. More of it is produced
6. Any given demand or supply curve is based on the certeris paribus assumption that _______.
a. Everything is variable
b. All else is held equal
c. No one knows which variables will change and which will remain constant
d. What is true for the individual is not necessary true for the whole.
7. Economist refer to the relationship that a higher price leads to lower quantity demand as the ______________.
a. Price model
b. Law of demand
c. Market equilibrium
d. Income gap
8. A perfect elastic supply curve is:
a. Vertical
b. Downward sloping to the left
c. Horizontal
d. Upward sloping to the right
9. A 10 percent increase in the price of soda leads to a 20 percent increase in the quantity of iced tea demanded. It appears that:
a. Elasticity of demand for iced tea is 2 and is elastic
b. Cross-price elasticity of demand for iced tea is -2
c. Cross-price elasticity of demand for soda is -0.5
d. Elasticity of demand for soda 0.5 AND IS INELASTIC
10. ___________ is the change in what is on the horizontal axis (quantity) divided by the change in what is the vertical axis (price).
a. Elasticity
b. Supply
c. Demand
d. Revenue
11. A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of:
a. The supply curve and the rightward shift of the demand curve resulting in a higher equilibrium price
b. Both the supply and demand curves
c. The supply curve
d. The demand curve, as consumers try to economize because the shortage.
12. Got the answer.
13. A drought decreases the supply of agricultural products, which means that at any given price a lower quantity will be supplied; conversely, especially good weather would shift the _____________.
a. Demand curve to the right
b. Supply curve to the left
c. Supply curve to the right
d. Demand curve to the left
14. Interpret the following statements:

magentacoyote534

In the early part of the last decade, there was an overproductionof coffee. The price dropped so low that producers' costs werehigher than the market price. The reason this happened was thatmarket prices became high before this, and the supply of coffeeincreased substantially. In the meantime, demand for coffee andeverything else remained the same. Price Level 1.

Coffee prices came down again, at first overshooting the formerequilibrium price, throwing the coffee market into confusion. Inthe meantime, gourmet coffee houses began appearing, which begancharging a premium for coffee in the period of falling prices.Price Level 2.

Gourmet coffee houses tend to open in high-rent areas and cater tohigher income consumers. Because of the change they created fortaste and preferences and the higher income market, the gourmetcoffee houses had a win-win in a period of falling wholesale pricesand increasing retail prices. Price Level 3.

But in the middle of the decade, the party was over, and wholesaleprices started increasing because of some shortages caused byweather and the rising overall market prices again. Where is thenew equilibrium price? Price Level 4.

Explain the changes in the supply and demand curves based on theabove information. Draw a graph showing how the changes affect theprice levels, supply and demand.

Scenario Two

You have been asked to discuss the differences between themicroeconomic definitions of supply and demand and themacroeconomic differences of aggregate supply and demand. Discusswhat determines supply and demand and aggregate supply andaggregate demand. Explain what causes movements along the curve andshifts in the curve for supply and demand and aggregate supply andaggregate demand (make sure that you include price as a variable).Include whether this is an example of the microeconomic definitionof supply and demand or the macroeconomic definition of aggregatesupply and demand. Most importantly, did this cause a shift in thecurves or a movement along the curves? What happened to equilibriumprice, supply, demand, aggregate supply or aggregate demand?Describe your graphs.

After Hurricane Katrina, what happened to the price of fish?
After the development of the microchip, what happened to the priceof computers?
After the government raised tariffs on imported cheese, whathappened to the price of domestic cheese?
Polyester suits have become trendy again. What happens to theirprice?
Internet auction sites are becoming more popular, and people areusing them more and more.
An new health report came out that said red wine lowerscholesterol.
The government raises taxes.
Inflation increases.
Immigration laws are relaxed.
The government increases spending.
Scenario Three

The PPF curve shows the economic choices a country can make aboutproduction given scarce resources, a given technology, and a givenquantity of inputs. Assume you are a developing country, producingfood and clothing at maximum capacity. What could happen whenforeign investors start investing in your country?

Discuss what type of foreign investments would be best for theeconomy

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ECON1101 Chapter Notes - Chapter 4: Aggregate Demand, Economic Equilibrium, Marginal Cost

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