ECON 1100 Chapter Notes - Chapter 3: Excess Supply, Shortage, Demand Curve

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coffeebuffalo475

23 Apr 2016

School

University of Windsor

Department

Economics

Course

ECON 1100

Professor

bajic

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Document Summary

Consumers (households) demand the goods and services (for utility) The business firms supply the goods and services (for profit) Consumer tastes or preferences (t) - (if you like them, you demand more) Consumer income (m) - (more money you have, the more you have to spend) Depends on prices of other goods/commodities (p*) If something similar is cheaper, you might demand eggs less (milk) Mrs. clake (decision maker in house) (decision maker in house) (decision maker in house) * if 500 were interviewed, we multiply by the total population factor . Ceteris paribus assumption (as the price of eggs decrease, the demand is higher) In other words meaning all other things held constant . Or if all other variables that influence the demand for _____ did not change . T,m,p* do not change in this case, while p changes. The individual demand schedule is shown above (table format)

Related Questions

The following table shows the market demand schedule and supply schedule for notebooks.

Price ($/unit)	Quantity Demanded (units)	Quantity Supplied (units)
1	20	4
2	16	6
3	14	10
4	12	12
5	10	14
6	7	17
7	4	20
8	2	22
9	1	25

Refer to the table above. Assume that the market for notebooks is in equilibrium.

1. Which of the following is likely to happen if there is an increase in the school enrollment rate, everything else remaining unchanged?

A. Both the equilibrium price and quantity of notebooks decrease.

B. The equilibrium price and quantity remain unchanged.

C. Both the equilibrium price and quantity of notebooks increase.

D. The equilibrium price increases, but the equilibrium quantity of notebooks decreases.

2. A shortage occurs in a market when:

A.price is lower than the equilibrium price.

B. price is higher than the equilibrium price.

C. supply exceeds demand.

D. the marginal utility of consumption is negligible.

3. A change in the quantity demanded of a good is:

A. the outcome of a change in income.

B. the outcome of a change in tastes and preferences.

C. represented by a shift to a new demand curve.

D. represented by a movement along the demand curve.

4. The following table shows the demand schedules of three consumers of wine. Assume that these three buyers constitute the entire market.

PRICE ($/Bottle)	Sandra's Demand (Bottles)	David's Demand (Bottles)	Mary's Demand (Bottles)
â$8	2		10
â$6	14	15	18
â$4		23	24
â$2	24	27	28

Refer to the table above. If the market price of wine is $8/bottle, and the market demand for wine is 19 bottles, David's consumption of wine is:

A. 12 bottles.

B. 9 bottles.

C. 4 bottles.

D. 7 bottles.

5. Which of the following factors will NOT cause a shift in the demand for a good?

A. A change in the number of consumers

B. A change in the market price of the good

C. A change in tastes and preferences

D. A change in consumer incomes

6. Are all markets perfectly competitive?

A. No, there are other market types where firms have considerable power to control the price.

B. Yes, any economic system with a market structure is by definition perfectly competitive.

C. No, there are also command and control markets that are run by a central government.

D. No, in other types of markets, sellers offer identical goods and simply accept the market price.

7. Assume that a seller in a perfectly competitive market charges more than the equilibrium price. It is likely that this seller will:

A. increase his profit.

B. lose only a few buyers.

C. increase his sales.

D. lose almost all of his buyers.

8. The willingness to pay for a commodity:

A. increases as the consumption of the commodity increases.

B. is always less than the market price of the commodity.

C. decreases as the consumption of the commodity increases.

D. is always greater than the market price of the commodity.

9. Which of the following is likely to lead to a right shift in the supply curve of cotton?

A. An increase in labor productivity due to training programs

B. A rise in labor costs due to wage demands by labor unions

C. An increase in the price of cotton

D. A decrease in the price of cotton

10. The buyers of a good will want to purchase it as long as their willingness to pay for the good is:

A. equal to zero.

B. greater than or equal to the price.

C. greater than zero.

D. less than the price.

redmammoth450

1. If the cross price elasticity of demand between two commodities is positive, then these commodities are

Select one:

a. are complements.

b. are inferior.

c. are superior.

d. are substitutes.

Answer...?

2. Along a given indifference curve, a consumer reduces the quantity of one good in favor of more units of the other. In this situation

Select one:

a. the marginal utility of the first rises and the marginal utility of the second good falls.

b. Total utility rises.

c. Both the marginal rate of substitution falls and the marginal utility of the first rises and the marginal utility of the second good falls are correct.

d. the marginal rate of substitution falls.

Answer...?

3. Along a given indifference curve, a consumer reduces the quantity of one good in favor of more units of the other. In this situation

Select one:

a. the marginal utility of the first rises and the marginal utility of the second good falls.

b. Total utility rises.

c. Both the marginal rate of substitution falls and the marginal utility of the first rises and the marginal utility of the second good falls are correct.

d. the marginal rate of substitution falls.

Answer...?

4. Moral hazard is a barrier to financing global growth because

Select one:

a. of the differences between financing using loans, portfolio investment and foreign direct investment.

b. there is the possibility that the funds are used for riskier behavior than the lender agreed to.

c. firms sometimes have trouble determining whether they need funds or not.

d. if investors have trouble identifying high-risk firms they may be unwilling to give money to creditworthy firms.

5. Moral hazard is a barrier to financing global growth because

Answer...?

6. Which of the following statements is FALSE?

Select one:

a. Price elasticity of supply can never equal 1.

b. Time is an important consideration in determining supply elasticity.

c. A horizontal supply curve is possible.

d. A perfectly inelastic supply curve is a vertical line.

Answer...?

7. Corporations are able to raise large amounts of financial capital because

Select one:

a. of limited liability and the treatment of a corporation as an individual entity.

b. of the tax breaks corporations are given relative to partnerships or proprietorships.

c. of the elimination of the problem of separation of ownership and control.

d. of their greater ability to monitor the performance of decision makers.

Answer...?

8. The largest quota subscriber of the International Monetary Fund (IMF) is

Select one:

a. China.

b. Japan.

c. Germany.

d. the United States.

Answer...?

9. To derive the demand curve from the indifference map,

Select one:

a. vary the prices of both goods while holding income constant.

b. vary the price of one good while holding the price of the other good and income constant.

c. vary income while holding the prices constant.

d. vary the price of one good and income while holding the price of the other good constant.

Answer...?

10. As an individual consumes more of a particular commodity, the total level of utility derived from that consumption will

Select one:

a. increase at a constant rate.

b. increase at a decreasing rate.

c. remain constant.

d. increase at an increasing rate.

Answer...?

11. Which of the following is a TRUE statement about stock markets?

Select one:

a. It is always better to buy growth stocks than the older and more stable blue-chip stocks.

b. Economists can make above-average profits in the stock market because of their specialized knowledge of economics.

c. It is illegal for a friend of a corporate executive to make large profits in the stock market by using his inside information.

d. The stock market on average over time is random and totally unrelated to the performance of the economy.

Answer...?

12. Income elasticity of demand is defined as

Select one:

a. the percentage change in demand divided by the percentage change in income.

b. the percentage change in income divided by the percentage change in quantity demanded.

c. the change in quantity demanded divided by the change in market price.

d. the change in quantity demanded divided by the change in income.

Answer...?

13. The consumption possibilities curve is the

Select one:

a. budget constraint.

b. indifference curve.

c. supply curve.

d. demand curve.

Answer...?

14. According to the random walk theory,

Select one:

a. the probability that a stock's price will increase tomorrow is greater if it increased today.

b. the probability that a stock's price will increase tomorrow is greater if it decreased today.

c. the best forecast of tomorrow's price is today's price.

d. the best forecast of tomorrow's price is found by determining the trend for the last five trading days.

Answer...?

15. "Unit elasticity of demand can be found everywhere along a straight-line demand curve with a slope of -1." Do you agree or disagree? Explain.

Answer:

16. For which of the following would the absolute price elasticity of demand be greatest?

Select one:

a. Pepsi Cola

b. Tickets to the Super Bowl

c. Salt

d. Gasoline

Answer...?

16. The price of a hamburger is $1 and the price of a movie is $4 and the consumer has $10. A consumer has purchased 2 hamburgers and 2 movies, receiving 25 units of utility for the second hamburger and 100 units of utility for the second movie. The set of goods

Select one:

a. is not an optimum because the marginal utility per dollar spent is greater for hamburgers than for movies.

b. is not an optimum because the consumer has not spent all of his money.

c. is an optimum since the entire income is spent and total utility is minimized.

d. is an optimum since the entire income is spent and the marginal utility per dollar spent is the same for the last unit of each good.

Answer...?

17. Marginal utility

Select one:

a. is stable, but then as a person consumes more of a good or service, has a propensity to increase.

b. equals the total satisfaction from consumption of goods and services.

c. can be thought of as being the equivalent to total utility.

d. at first rises and then declines as a person consumes more of a good or service.

Answer...?

18. The nominal rate of interest is 4% and the anticipated rate of inflation is 5%. What is the real rate of interest?

Select one:

a. 1%

b. 4%

c. -1%

d. 9%

Answer...?

19. Using the above table, what is the total utility of consuming 3 bottles of soda?

Select one:

a. 115

b. 135

c. 120

d. 240

Answer...?

20. Dead capital is

Select one:

a. machinery that fails to operate properly.

b. a capital resource that depreciates rapidly.

Answer...?

21. What is the annual rate of growth of per capita real GDP if real GDP grows at a constant rate of 5 percent per year and the annual rate of population growth is 3 percent?

Select one:

a. 1.7 percent

b. 8 percent

c. 5 percent

d. 2 percent

c. machinery that requires constant maintenance.

d. any capital resource that lacks clear title of ownership.

Answer...?

ECON 1100 Chapter Notes - Chapter 3: Excess Supply, Shortage, Demand Curve

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