Question 1: What is wrong with the statement: Demand refers to the willingness of buyers to purchase different quantities of a good at different prices during a specific time period:
- Instead of “demand”, it should be “quantity demanded”.
- Instead of “willingness”, it should be “ability”.
- Demand refers to the willingness and ability of buyers, not just willingness.
- There is nothing wrong with the statement.
Answer 1: Demand refers to the willingness and ability of buyers, not just willingness.
Question 2: _______________ refers to the willingness and ability of buyers to purchase different quantities of a good at different prices during a specific time period whereas __________________ refers to a specific number of units buyers want to buy at a specific price.
Answer 2: Demand and Quantity Demanded
Question 3: True or False: As the price of apples rises, the demand for apples falls, ceteris paribus.
Answer 3: False. It should be “quantity demanded” instead of “demand”.
Question 4: The price of 1 kg apples, which was $5 last month, is $6 today.
True of False: The demand curve for apples must have shifted rightward between last month and today.
Answer 4: False. Change in price of the good leads to movement along the demand curve, not shift.
Question 5: Suppose that Carlos and Deborah are the only consumers of scented candles in a particular market. The following table shows their annual demand schedules:
Find the market demand schedule.
Answer 5:
Question 6: Consider the demand curve for Sedans in the United States. For simplicity, assume that all sedans are identical and sell for the same price. Also, assume that:
The current market price of Sedans is $30,000
Average Household income is $60,000 per year
Price of a gallon of gas is $5 per gallon
Price of a subway ride is $2.50
Suppose the price of a sedan decreased from $30,000 to $25,000. This would cause a ________________ the demand curve.
If an increase in average income causes a rightward shift of the demand curve, then you may conclude that sedans are a _____________ good.
Suppose that the price of a gallon of gas rises from $5 to $6. Because sedans and gasoline are _____________, an increase in the price of a gallon of gas shifts the demand curve for sedans to the ____________.
Answer 6:
a) Movement along
b) Normal
c) Complements
d) Left
Question 7: Consider the supply curve for sedans in an imaginary market. For simplicity, assume that all sedans are identical and sell for the same price. Two factors that affect the supply of sedans are the level of technical knowledge – in this case, the speed with which manufacturing robots can fasten bolts, or robot speed – and the wage rate that auto manufacturers must pay their employees. Initially, the robots can fasten 2500 bolts per hour, autoworkers earn $25 per hour, the price of a sedan is $30,000 and the quantity supplied (Sedans per month) is 250.
Suppose that the price of a sedan decreases from $30,000 to $25,000. This would cause the ______________ of sedans to decrease , which is reflected on the graph by a _______________ supply curve.
Following a technological decline – for example, a decrease in the speed with which robots can attach bolts to cars – there is a __________________ shift of the supply curve because the technological decline makes cars more expensive to build.
Answer 7:
a) Quantity Supplied
b) Movement along the
c) Leftward
Question 8: Consider the market for cereal in San Francisco, where there are over a thousand stores that sell cereal at any given moment. Suppose the Surgeon General issues a public statement saying that consuming cereal is bad for your health.
Holding all else constant, this will lead to a:
a) Change in Demand
b) Change in Supply
c) Change in Demand and Change in Supply
d) No change in Demand and Supply
Answer 8: Change in Demand.
This public statement will lead to a leftward shift in the demand curve. This is because when consumers find out that eating cereal is bad for their health, they will decrease their consumption of cereal.
The supply curve does not shift because none of the factors affecting supply have changed.
Question 9: Consider the market for hamburgers in Dallas, where there are over a thousand burger joints at any given moment. Suppose an innovation in meat processing technology makes it possible to produce more hamburgers at a lower cost than ever before.
Holding all else constant, this will lead to a:
a) Change in Demand
b) Change in Supply
c) Change in Demand and Change in Supply
d) No change in Demand and Supply
Answer 9: Change in Supply.
The innovation in meat processing technology lowers the cost of producing hamburgers. Therefore, for any given price, producers are willing and able to supply more hamburgers. This leads to a rightward shift in the supply curve.
The demand curve does not shift because none of the factors affecting demand have changed.
Question 10: Consider the market for laptops in 2015. Between 2015 and 2016, the equilibrium price of laptops remained constant , but the equilibrium quantity of laptops increased. From this, you can conclude that between 2015 and 2016, the supply of laptops ________________ and the demand for laptops _______________.
Answer 10:
a) Increased
b) Increased
Because the price of laptops remained constant, both the demand curve and the supply curve must have shifted to the right.
Question 11: With respect to each of the following changes, identify whether the demand curve will shift leftward or rightward.
a) An increase in income (the good under consideration is an inferior good)
b) A rise in the price of a complementary good
c) A fall in the price of a substitute good
d) A rise in the number of buyers
Answer 11:
a) Demand Curve will shift leftward
b) Demand Curve will shift leftward
c) Demand Curve will shift leftward
d) Demand Curve will shift rightward
Question 12: Why might a movie theater charge a lower admission price for the first show on weekday afternoons than they do for a weeknight or weekend show?
a) Demand is lower for the weekday afternoon showing of the movie than for the weeknight or weekend showing.
b) The supply of seats in the theater is greater on a weekday afternoon and the demand to see the movie is lower for the weekday afternoon showing.
c) Theaters like to show with the lower prices that they want every income group to attend their movies.
d) The supply of seats in the theater is greater on a weekday afternoon.
Answer 12: Demand is lower for the weekday afternoon showing of the movie than for the weeknight or weekend showing.
The supply of seats in the theater is same irrespective of weekday afternoon, weekday night or weekend.
Question 13: Indicate how each of the following will affect the current supply (Increase supply or Decrease Supply) for personal computers.
a) A rise in wage rates
b) An increase in the number of sellers of computers
c) A tax placed on the production of computers
d) A subsidy placed on the production of computers
Answer 13:
a) Decrease Supply
b) Increase Supply
c) Decrease Supply
d) Increase Supply
