ECN 104 Lecture 2: September 15th 2015

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28 Oct 2015

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Supply schedule: a supply schedule shows how much of a good or service would be supplied at different prices the period of time, the more sensitive the amount sold, a supply curve shows graphically how much of a good or service people are willing to sell at any given price, hold costs/wage rates constant. An increase in supply: the adoption of improved cotton growing technology generated an increase in supply a rise in the quantity supplied at any given price e, this event is represented by the two supply schedules and their corresponding supply, a shift of the supply curve is a change in the quantity supplied of a good at any given curves price, a movement along the supply curve is a change in the quantity supplied of a good that is the result of a change in that good"s price.

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Section I: Supply & Demand Analysis (Chapter 3) In each of the following 10 questions, show what happens to the Demand, Supply, equilibrium price and equilibrium quantity of copper. Show an increase by use of +, a decrease with a -, and no change with 0 (thatâs a zero, not an O or o). Although in the real world, both supply and demand are constantly changing, in the model we are using here, only one curve shifts per problem. So, if demand goes + or -, supply will be 0, and vice versa. In no case will equilibrium price or equilibrium quantity be 0. You may want to sketch out the supply and demand curve analysis to help in answering the questions. You will also be required to identify which determinant (of demand or supply) has changed, thus causing the shift. Rather than actually writing in the determinant, fill in the blank with the number that corresponds to the relevant determinant, based upon the following list. You may want to refer to the lecture notes entitled Determinants of Demand & Supply in the COURSE CONTENTS section. For questions 1 - 10, refer back to this list. Some you may want to use more than once, some you won't use at all. Copy and paste this list to an MS Word document and then print it out if you don't want to keep scrolling back and forth between this list and the question you're trying to answer. Determinants of Demand: 1. Change in buyer tastes 2. Change in number of buyers 3. Change in income 4. Change in the prices of related goods (on the demand side) 5. Change in consumer expectations Determinants of Supply: 6. Change in resource prices 7. Change in technology 8. Changes in taxes and subsidies 9. Change in prices of related goods (on the supply side) 10. Change in producer expectations 11. Change in the number of suppliers. For example, if a rightward shift in the supply curve for an item were caused by an increase in the number of producers of that item, you would indicate this be entering 11 into the relevant blank. If the demand curve shifted to the left because people didn't like that item anymore (like mimeograph machines), you'd enter 1 into the blank. Q#1 President Trump signs into law a bill that says the U.S. government will subsidize the construction of new homes, office buildings, bridges, and other infrastructure projects requiring copper. Demand; Supply: Equilibrium Price: Equilibrium Quantity Exchanged; Which determinant changed?: Q#2 Non-capitalist economies around the world begin a phase of rapid economic development, construction and growth, becoming increasingly wealthy, as they begin to adopt more capitalist institutions, as in China, Russia, and the former communist countries of East Europe. Demand; Supply: Equilibrium Price: Equilibrium Quantity Exchanged: Which determinant changed?

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

17. Which of the following is a determinant of supply?

A. Tastes and preferences

B. Price of a complementary good

C. Consumer income

D. Technology

18. A market is in equilibrium:

A. provided there is no surplus of the product

B. at all prices above that shown by the intersection of the supply and demand curves

C. if the amount producers want to sell is equal to the amount consumers want to buy

D. whenever the demand curve is downsloping and the supply curve is upsloping.

19. If the market price is above the equilibrium price:

A. A shortage will occur and producers will produce more and lower prices

B. A surplus will occur and producers will produce less and lower prices

C. A surplus will result and consumers will bid prices up

D. Producers will make extremely high profits

20. The market system automatically corrects a surplus condition in a competitive market by:

A. Raising the price of the commodity in question while increasing the quantity demanded

B. Raising the price of the commodity in question while decreasing the quantity demanded

C. Reducing the price of the commodity in question while increasing the quantity demanded

D. Reducing the price of the commodity in question while decreasing the quantity demanded

21. The price elasticity of demand measures:

A. buyer responsiveness to price changes.

B. the extent to which demand curve shifts as incomes change.

C. the slope of the demand curve.

D. how far business executives can stretch their fixed costs

22. The elasticity of demand for a product is likely to be greater:

A. if the product is a necessity, rather than a luxury good.

B. the greater the amount of time over which buyers adjust to a price change

C. the smaller the proportion of one's income spent on the product.

D. the smaller the number of substitute products available.

23. Market failure is said to occur whenever:

A. private markets do not allocate resources in the most economically desirable way

B. prices rise

C. some consumers who want a good do not obtain it because the price is higher than they are willing to pay

D. government intervenes in the functioning of private markets.

24. A negative externality or spillover cost occurs when:

A. firms fail to achieve allocative efficiency.

B. firms fail to achieve productive efficiency.

C. the price of the good exceeds the marginal cost of producing it.

D. the total cost of producing a good exceeds the costs borne by the producer

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ECN 104 Lecture 2: September 15th 2015

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