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Questions on Demand, Supply, Market Equilibrium | BM 115, Assignments of Introduction to Macroeconomics

Mohawk Valley Community College - Utica BranchIntroduction to Macroeconomics

Material Type: Assignment; Class: Prin of Macroeconomics; Subject: Business Management; University: Mohawk Valley Community College-Utica Branch; Term: Unknown 2000;

Typology: Assignments

Pre 2010

Uploaded on 08/16/2009

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Chapter 3
CHAPTER 3
Demand, Supply, and Market Equilibrium
A. Short-Answer, Essays, and Problems
1. Explain what is meant by a purely competitive market.
2. Define “demand.”
3. State the law of demand and explain why the other-things-equal assumption is
critical to it.
4. Give three explanations for the law of demand:
5. Suppose the price of beef fell dramatically as the price of feed grain decreased.
Use the income effect and the substitution effect to explain why there was an
increase in the quantity of beef purchased.
6. The demand schedules of three individuals (Tom, Dick, and Harry) are shown.
If they are the only three buyers of CDs, complete the market demand schedule
for CDs. Graphically, is the market demand for a product the horizontal or
vertical sum of the individual demand schedules?
Quantity demanded, CDs
Price Tom Dick Harry Total
$15.00 1 4 0 _____
13.00 3 5 1 _____
11.00 6 6 5 _____
9.00 10 7 10 _____
7.00 15 8 16 _____
7. List five basic determinants of market demand that could cause demand to
decrease. (The text mentions seven possibilities.)
8. Differentiate between a normal (superior) and an inferior good.
10. Give examples of two substitute goods and two complementary goods. In each
case explain why the goods are substitutes or complements.
11. What is the difference between a change in demand and a change in quantity
demanded?
pf2

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Download Questions on Demand, Supply, Market Equilibrium | BM 115 and more Assignments Introduction to Macroeconomics in PDF only on Docsity!

Chapter 3

CHAPTER 3

Demand, Supply, and Market Equilibrium

A. Short-Answer, Essays, and Problems

1. Explain what is meant by a purely competitive market.

2. Define “demand.”

3. State the law of demand and explain why the other-things-equal assumption is

critical to it.

4. Give three explanations for the law of demand:

5. Suppose the price of beef fell dramatically as the price of feed grain decreased.

Use the income effect and the substitution effect to explain why there was an

increase in the quantity of beef purchased.

6. The demand schedules of three individuals (Tom, Dick, and Harry) are shown.

If they are the only three buyers of CDs, complete the market demand schedule

for CDs. Graphically, is the market demand for a product the horizontal or

vertical sum of the individual demand schedules?

Quantity demanded, CDs Price Tom Dick Harry Total $15.00 1 4 0 _____ 13.00 3 5 1 _____ 11.00 6 6 5 _____ 9.00 10 7 10 _____ 7.00 15 8 16 _____

7. List five basic determinants of market demand that could cause demand to

decrease. (The text mentions seven possibilities.)

8. Differentiate between a normal (superior) and an inferior good.

10. Give examples of two substitute goods and two complementary goods. In each

case explain why the goods are substitutes or complements.

11. What is the difference between a change in demand and a change in quantity

demanded?

  1. Define “supply.”

18. List six basic determinants of market supply.

  1. Suppose the U.S. Congress is considering passing an excise tax that would increase the price of a pack of cigarettes by $1.00. What would be the likely effect of this change on the demand and supply of cigarettes? What is likely to happen to cigarette prices and the quantity consumed if the tax bill is enacted?
  2. Using the schedules given, plot the demand curve and the supply curve on the below graph. Label the axes and indicate for each axis the units being used to measure price and quantity. Then answer the questions. Price Quantity demanded (bushels of oats) Price Quantity supplied (bushels of oats) $1.50 10,000 $4.40 40, 1.40 15,000 4.20 35, 1.30 20,000 4.00 30, 1.20 25,000 3.80 25, 1.10 30,000 3.60 20, 1.00 35,000 3.20 15, (a)Give the equilibrium price and quantity for oats. (b) Indicate the equilibrium price and quantity on the graph by drawing lines from the intersection of the supply and demand curves to the price and quantity axes. (c)If the Federal government decided to support the price of oats at $1.40 per bushel, tell whether there would be a surplus or shortage and how much it would be. (d) Demonstrate your answer to part (c) on your graph being sure to label the quantity you designated as the shortage or surplus.