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If price changes...
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quantity demanded increases or decreases (represented by a movement along the demand curve)
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If a factor other than price changes...
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the demand curve increased or decreased (a shift i the demand curve)
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Changes in prices of a good causes
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Movement along the demand curve
Movement along the supply curve
Movement along the supply curve
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If the market for a certain product experiences an increase in supply and a decrease in demand,
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The equilibrium price would fall, and the equilibrium quantity could rise or fall
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Suppose a recent and widely circulated medical article has reported new benefits of cycling for exercise. Simultaneously, the price of the parts needed to make bikes falls. If the change in supply is greater than the change in demand, the price will _________ and the quantity will _________.
answer
fall, rise
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Suppose there are 9 sellers and 9 buyers, each willing to buy or sell one unit of a good, with values ($10, $9, $8, $7, $6, $5, $4, $3, $2). Assuming there are no transaction costs, what is the equilibrium price in this market?
answer
$6
question
Say the average price of a home in Lampard City is $160,000. The local government has just passed new licensing requirements for housing contractors. Based on possible shifts in demand or supply and assuming that the licensing changes don't affect the quality of the new houses, what is the average price for a new home in the future?
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$170,000
question
The price of peanuts increases. At the same time, we see the price of jelly rise. How does this affect the market for peanut butter? (regarding demand and supply curves)
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The demand curve will shift to the left; the supply curve will shift to the left
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Holding other factors constant, a decrease in the tax for producing coffee
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the supply curve to shift to the right, causing the prices of coffee to fall
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As the income of bus riders increased, the wages of bus drivers increased simultaneously. How does this affect the market for bus rides (inferior good)?
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The demand curve will shift to the left; the supply curve will shift to the left
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An increase in income causes the demand for inferior goods to_____________ and the price of inferior goods to ____________.
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decrease, decrease
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Changes in the price of a product can cause
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A movement along the demand curve
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Demand and supply analysis is particularly important if
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the success of your firm is closely linked to the profitability of your primary industry
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An increase in the price of a substitute shifts the demand curve to the _______
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right
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A recent medical study shows that peanuts are one of the leading causes of high cholesterol. This would cause the demand for peanuts to
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shift to the left
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A decrease in the price of a complement shifts the demand curve to the
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Right
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A recent medical study reports new benefits of cycling. Simultaneously, the price of the parts needed to make bikes falls. The demand curve would _________ and the supply curve would__________
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shift to the right; shift to the right
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The change in any factor other than ________ would shift the demand curve
answer
Price
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How does an increase in the price of laptop memory chips affect the market of laptops?
answer
the supply curve for laptops shifts to the left
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An increase in price could occur due to a(n)
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increase in demand and no change in supply
decrease in supply and no change in demand
an increase in demand and decrease in supply
decrease in supply and no change in demand
an increase in demand and decrease in supply
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Suppose there are 11 buyers and 11 sellers, each willing to buy or sell one unit of a good, with values {$14, $13, $12, $11, $10, $9, $8, $7, $6, $5, $4,}. Assume no transaction costs and a competitive market, what is the equilibrium price in this market?
answer
$9
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Firm X both produces automobiles and owns gas stations. If decides to decrease the gas to induce higher sales for the automobiles, it means that
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they are compliments
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Suppose there are 11 buyers and 11 sellers, each willing to buy or sell one unit of a good, with values {$14, $13, $12, $11, $10, $9, $8, $7, $6, $5, $4,}. Assume no transaction costs and a competitive market. If there is a market maker in this market. What is the profit maximizing bid-ask spread per unit for a market maker?
.
.
answer
$6 bid; $12 ask
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Firm X owns both tea and coffee plantations. It sells directly to the public. If the firm wants to increase the sales for the coffee, assuming that tea and coffee are substitutes, which of these strategies can it employ?
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increase the price of tea and offer free shipping on coffee
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"Market making"
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is the action of bringing together high value buyers and low value sellers
transfers goods from their low value uses to high value uses, creating wealth
can not occur if the transaction costs are too high to prevent value creating transactions
transfers goods from their low value uses to high value uses, creating wealth
can not occur if the transaction costs are too high to prevent value creating transactions
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Uncontrollable factors (reasons for a shift in the demand curve)
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something that affects demand that a company cannot control. Ex. Income, weather, interest rates
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Controllable factors (reasons for a shift in the demand curve)
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something that affects demand that a company can control. Ex. Price, advertising, warranties
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