ECON 160 Lecture Notes - Lecture 7: Ceteris Paribus, Demand Curve, Farad

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indigoraven449

22 Sep 2016

School

Binghamton University

Department

Economics

Course

ECON 160

Professor

Susan W.Hanes

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Document Summary

Chapter 4: the market forces of supply and demand (cont) When people have more wealth they buy more stuff. Number of people in a market that affects the demand schedule. The number of goods which could be sold at a given price (schedule of price and quantities) As the price falls, the number of goods demanded rise. True by assumption that people are greedy y=f(x) Because given up opportunity cost, reallocating income, reallocating concert tickets. When prices drop people enter the market. As price drops, individual with lower tastes for the good enter the market. As price drops, people with lower income enter the market. As the price rises in the quantity also changes. Band 1 has a higher opportunity cost of providing concert tickets than band 3: true b. Band 1 unwilling to supply concert tickets until higher price. Band 3 willing to play at any concert, will supply at low price.

Related Questions

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:

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1) Suppose your grandmother gave you $25 for your birthday and you decided to spend all of it on candy bars and bags of popcorn. The price of candy bars is $1.25 and price of a bag of peanuts is $3.75.

a) Construct a table showing the alternative combinations of the two products that are available.

b) Plot the data in your table as a budget line in a graph. What is the slope of the budget line? What is the opportunity cost of one more candy bar? Of one bag of peanuts?

c) How, in general, would you decide which of the available combinations of candy bars and bags of peanuts to buy?

2) With current technology, suppose a firm is producing 750 screwdrivers daily. Also assume that the least-cost combination of resources in producing those screwdrivers is 15 units of labor, 20 units of land, 4 units of capital, and 3 unit of entrepreneurial ability, selling at prices of $50, $45, $75, and $50, respectively. If the firm can sell these 750 screwdrivers at $2.50 per unit,

a) what is its total revenue?

b) what is its total cost?

c) what is its profit or loss?

d) will it continue to produce screwdrivers?

e) If this firmâs situation is typical for the other makers of screwdrivers, will resources flow toward or away from this product?

3) How will each of the following changes in demand and/or supply affect equilibrium price and equilibrium quantity in a competitive market; that is, do equilibirium price and quantity rise, fall , or are the answers indeterminate because they depend on the magnitudes of the shifts?

a)Supply decreases and demand is constant. Change in eqilibrium price chnage in eqilibrium quantity

b)Demand decreases and supply is constant.

c)Supply increases and demand is constant.

d)Demand increases and supply increases.

e)Demand decreases and supply decreases.

4)Zeke likes to go to music concerts. The number of times per year that he attends concerts depends on both the price of the concerts as well as Zekeâs income and the cost of other types of entertainmentâin particular, how much it costs to go see a movie instead of attending concerts. The three demand schedules in the $60,000 per year and movies cost $10 each. In scenario D2, Zeke's income is also $60,000 per year, but the price of seeing a movie rises to $12. And in scenario D3, Zeke's income goes up to $80,000 per year, while movies cost $12.

a)Using the data under D1 and D2, calculate the cross-elasticity of Zeke's demand for concerts at all three prices. (To do this, apply the midpoints approach to the cross-elasticity of demand.) Is the cross-elasticity the same at all three prices? Are movies and concerts substitute goods, complementary goods, or independent goods?

b)Using the data under D2 and D3, calculate the income elasticity of Zeke's demand for concerts at all three prices. (To do this, apply the midpoints approach to the income elasticity of demand.) Is the income elasticity the same at all three prices? Are concerts an inferior good?

PRICE	D1	D2	D3
50	10	5	12
40	15	10	25
30	25	15	40

Income 60,000 60,000 80,000

Cost of revenue 10 12 12

5) On the basis of the three individual demand schedules below, and assuming these three people are the only ones in the society, determine (a) the market (a) the market demand schedule on the assumption that the good is a private good and (b) the collective demand schedule on the assumption that the good is a public good.

P	Qd(D1)	Qd(D2)	Qd(d3)
20	0	0	1
19	0	1	2
17	0	2	3
16	0	3	4
15	1	4	5
14	2	5	6
13	3	6	7
12	4	7	8
11	5	8	9
10	6	9	10

periwinklemuskrat632

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.

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ECON 160 Lecture Notes - Lecture 7: Ceteris Paribus, Demand Curve, Farad

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