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ECON 1B03 Lecture Notes - Lecture 2: Substitute Good

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erincat447
21 May 2018
School
McMaster University
Department
Economics
Course
ECON 1B03
Professor
Hannah Holmes

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Market Supply Example
- Supply schedule for Paul and John, the only two firms that sell candy bars in the market
Change in Quantity Supplied
- A change in quantity supplied: is movement along the supply curve when the price of the good
changes
- The supply curve itself: does NOT move
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ECON 1B03 Full Course Notes
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ECON 1B03 Full Course Notes
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Document Summary

Supply schedule for paul and john, the only two firms that sell candy bars in the market. A change in quantity supplied: is movement along the supply curve when the price of the good changes. A change in supply: is a shift of the supply curve due to change in anything other than the price of the good. An increase in supply means a shift to the right. A decrease in supply means s shift to the left. If input prices increase, the supply curve shifts to the left (and vice versa) An increase in the price of a substitute good in production will decrease the supply of the other good (shift to left) An increase in the price of a compliment in production will increase the supply of the other good (shift to right) Advances in technology and an increase in the number of firms will shift the supply curve to the right.

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Related Questions

The primary difference between a change in supply and a change in the quantity supplied is:
Choose one answer.
a. a change in quantity supplied is a shift in the supply curve, and a change in supply is a movement along the supply curve.
b. both a change in quantity supplied and a change in supply are movements along the supply curve, only in different directions.
c. a change in quantity supplied is a movement along the supply curve, and a change in supply is a shift of the supply curve.
d. a change in supply is a movement to the left along the supply curve and a change in quantity supplied is a movement to the right along the supply curve.

Question 2
What is the difference between a shortage and scarcity?
Choose one answer.
a. Scarcity will always exist because choices must be made, but a shortage will only exist if the price is kept below the equilibrium level.
b. Scarcity is a result of two or more alternative uses and will always exist, and quantities of supply and demand adjusting to flexible prices will create shortages.
c. A surplus will exist when a good is scarce; a shortage merely implies that there isn't as much of something as people would like, which is nearly always the case.
d. There is no distinction between the two. They are the same thing.

Question 3
A decrease in supply means:
Choose one answer.
a. a shift to the left of the entire supply curve.
b. moving downward (to the left) along the supply curve with lower prices.
c. less will be demanded at every price.
d. more will be supplied at every price.

Question 4
A decrease in demand, with no change in supply, will lead to ________ in equilibrium quantity and ________ in equilibrium price.
Choose one answer.
a. an increase; an increase
b. an increase; a decrease
c. a decrease; an increase
d. a decrease; a decrease

Question 5
After graduation from college you will receive a substantial increase in your income from a new job. If you decide that you will purchase more T-bone steak and less hamburger, then for you hamburger would be considered a( n ):
Choose one answer.
a. normal good.
b. substitute good.
c. complementary good.
d. inferior good.

Question 6
There is equilibrium in the market when:
Choose one answer.
a. there is no shortage.
b. there is no surplus.
c. price is established where the supply curve and the demand curve intersect.
d. all of the above are true.

Question 7
Which would not cause the supply curve to shift?
Choose one answer.
a. a change in technology
b. a change in factor costs
c. a change in the price of the good
d. a change in the prices of related goods

Question 8
Given that meat and potatoes are complementary goods, if the price of meat decreases substantially, there would be:
Choose one answer.
a. an increase in the demand for potatoes.
b. an increase in the quantity of potatoes demanded.
c. a decrease in the demand for potatoes.
d. no change in the demand for potatoes.

Question 9
Given that milk and cookies are complements, suppose the price of flour (an ingredient in cookies) rises. What happens in the market for milk?
Choose one answer.
a. The equilibrium price and quantity rise.
b. The equilibrium price rises and the equilibrium quantity falls.
c. The equilibrium price and quantity fall.
d. The equilibrium price falls and the equilibrium quantity rises.

Question 10



A temporary price of $2 in this market would result in:
Choose one answer.
a. a surplus of 8,000 bushels.
b. a shortage of 8,000 bushels.
c. a shortage of 10,000 bushels.
d. a surplus of 10,000 bushels.

Question 11
The price of oranges rises. What happens in the market for apples, which are a substitute for oranges?
Choose one answer.
a. The equilibrium price falls, and the equilibrium quantity rises.
b. The equilibrium price rises, and the equilibrium quantity falls.
c. The equilibrium price and quantity rise.
d. The equilibrium price and quantity fall.

Question 12
A market surplus occurs if the:
Choose one answer.
a. price is below the equilibrium price.
b. price is equal to the equilibrium price.
c. equilibrium price is above the actual price.
d. equilibrium price is below the actual price.

16. A decrease in demand will have what effect on equilibrium price and quantity?

A. Price will increase; quantity will decrease.

B. Price will decrease; quantity will increase.

C. Both price and quantity will increase.

D. Both price and quantity will decrease.

17.

Along a supply curve,
Ā 
Ā  Ā  A. supply changes as price changes.
Ā  Ā  B. quantity supplied changes as price changes.
Ā  Ā  C. supply changes as technology changes.
Ā  Ā 

D. quantity supplied changes as technology changes

18.

If the price rises, what happens to the supply for a product?
Ā 
Ā  Ā  A. It increases.
Ā  Ā  B. It decreases.
Ā  Ā  C. It does not change.
Ā  Ā  D. Uncertain-economic theory has no answer to this question.

10) Suppose that a newer way to produce a good is discovered, which reduces production costs for the good. This will cause A) no change in the supply curve, only a change in price. B) a decrease in supply (a leftward shift of the supply curve). C) a movement up the supply curve. D) a movement down the supply curve E) an increase in supply (a rightward shift of the supply curve). The table below displays hypothetical demand and supply schedules for the market for overnight parcel deliveries in Canada. Price (S) 30 26 80 Quantity Demanded (millions) Year 1 Year 2 95 90 105 100 115 110 125 120 135 130 145 22 Quantity Supplied (millions) Year 1 Year 2 140 125 135 120 130 115 125 110 120 | 105 115 100 | 14 10 TABLE 3-3