S. Payesteh ECO
203/204 Name
_____________________
Homework #2
1.
A shortage
occurs whenever:
a) the price is below equilibrium
b) the price is above equilibrium
c) resources are unemployed
d) there is a price floor
2.
Which of the
following causes the demand for hot dogs to increase?
a) a decline in the price of hot
dogs
b) an increase in the price of
hamburgers
c) an increase in the price of hot
dog buns
d) a decrease in the wages of hot
dog makers
3.
A leftward shift
of the demand curve is called:
a) a decrease in price
b) a decrease in output
c) a decrease in demand
d) a decrease in income
4.
Compared to
lower-income families, high-income families consume less of which of the
following kinds of goods?
a) substitute goods
b) complementary goods
c) normal goods
d) inferior goods
5.
A higher price
of good X causes the demand for good Z to fall if goods X and Z are:
a) complementary goods
b) substitute goods
c) inferior goods
d) in equilibrium
6.
If the price of
a good is above the equilibrium price, which of the following occurs as the
market moves to equilibrium?
a) demand increases
b) supply decreases
c) the price falls
d) all the alternatives are correct
7.
If goods A and B
are two alternative goods that a producer could produce with the same
resources, which of the following causes an increase in the supply of good A?
a) an increase in the price of good
A
b) a decrease in the price of good B
c) an increase in the demand for
good B
d) an increase in the cost of producing
good A
8.
When the supply
curve is a vertical line, which of the following is true?
a) changes in demand have no impact
on the amount of the good producers sell
b) there is no equilibrium
c) the equilibrium price is the same
regardless of demand
d) the law of demand does not hold
9.
Which of the
following best explains why the equilibrium price of wool would fall at the
same time the equilibrium quantity would rise?
a) consumers, but not producers, of
wool expect a higher future price
b) producers, but not consumers, of
wool expect a lower future price
c) abnormally cold weather increases
the demand for wool sweaters
d) the cost of feeding sheep
increased
PROBLEMS
1.
For each of the
following events described, shift the curve or curves in the appropriate way in
the figure that follows each question.
Record for each event what has happened to demand, to supply, and to the
equilibrium values of price and quantity.
For example, in a) the demand curve shifted to the right because the
demand for a normal good increases when income rises. As a result, the answers are: demand has increased, supply has not changed,
the equilibrium price has increased, and the equilibrium quantity has also
increased.
I = increase D
= decrease NC
= no change
EVENT DEMAND SUPPLY EQULIBRIUM
PRICE EQUILIBRIUM
QUANTITY
a) What happens in the movie market if I NC I I
movies are a normal good and consumers
receive more income?
b) What is the impact in the wooden yo-yo
market if the price of wood increases?
c) What happens in the market for big,
gas-guzzling cars if the price of gasoline
falls?
EVENT DEMAND SUPPLY EQULIBRIUM PRICE EQUILIBRIUM QUANTITY
d) What happens in the market for
wood-burning
stoves if there is a
decrease
in the price of electricity
and
natural gas?
e) What happens in the wheat market if
scientists discover a higher-yielding
strain of wheat?
f) What happens in the beef market if
there is an increase in the price of
chicken and an increase in the price
of
feed for cattle?
EVENT DEMAND SUPPLY EQULIBRIUM
PRICE EQUILIBRIUM QUANTITY
both
consumers and producers begin to
expect a lower future price of gold?
potatoes, an inferior good, if incomes
rise at the same time that a freeze kills
some potato buds?
2. a) In Figure 4.1,
show the impact of a price ceiling set at $300.
What is the:
quantity demanded?
_______________________________________________________
quantity supplied?
_________________________________________________________
price paid by consumers?
___________________________________________________
quantity consumed by consumers
____________________________________________
b) In Figure 4.1,
show the impact of a price ceiling set at $100.
What is the:
quantity demanded?
_______________________________________________________
quantity supplied?
_________________________________________________________
price paid by consumers?
___________________________________________________
quantity consumed by consumers?
___________________________________________
3. a) In Figure 4.2,
plot a demand curve based on the accompanying data.
c) What is the equilibrium
quantity? _____________________________________________