ECON101 Lecture Notes - Lecture 5: Economic Equilibrium, Situation Two, Root Mean Square

23 views1 pages

magentamosquito756

4 Apr 2017

School

University of Waterloo

Department

Economics

Course

ECON101

Professor

Corey Van De Waal

For unlimited access to Class Notes, a Class+ subscription is required.

purplechimpanzee495 and 51 others unlocked

ECON101 Full Course Notes

Verified Note

79 documents

Document Summary

Theories of demand and supply: supply, market equilibrium. Sc= f (pc, cf, poc, efp, fn, t) Price of other related commodities: substitutes in production. Situation 1: the price of corn increases: firms producing wheat will provide corn, producers supply less wheat at each price, supply of what shifts to the left (decrease in supply) Situation 2: producers supply more wheat at each price, supply of wheat shifts to the right (increase in supply of wheat) Price of skies, ski boots: producers supply more skit boots @ each price, supply of ski boots shifts to the right (increase in supply of ski boots) Producers supply less ski boots @ each price. Supply of ski boots shifts to the left (decrease in supply of ski boots) Expected future prices (efp: if rms in the industry expect the price of the commodity to fall or decline in the future, they will supply more now since the pro t is higher.

Related Questions

1. A farmer can grow wheat or corn. If the price of wheat increases, the farmer expects a better return from growing wheat. All else equal, the corn supply curve

a. shifts to the right.

b. shifts to the left.

c. stays where it is. This is a movement along the corn supply curve.

d. becomes a backward-bending curve.

2 The opportunity cost of a new public highway is the

a. other goods and services that must be sacrificed to construct the new highway.

b. money cost of hiring contractors and construction workers for the new highway.

c. cost of constructing the new highway in a future year.

d. increase traffic from the use of the new highway.

3. All else equal, which of the following will cause the demand curve for a good to shift to the left (decrease)?

a. an increase in the price of the good.

b. an expectation of a future price decline.

c. a decrease in the price of the good.

d. an increase in the supply of a good.

(1) If a demand curve shifts to the left, then:
a) price would go up and quantity would go down
b) price would go down and quantity would go up
c) a lower price and quantity would result
d) a higher price and quantity would result

(2) Demand and supply curves are drawn assuming ceterisparibus.This means that:
a) economists ignore all assumptions
b) economists don't watch for the fallacy of false cause
c) changes will be proportional
d) all other things besides price and quantity are unchanged

(3) If steak and potatoes are complements, when the price ofsteakgoes up, the demand curve for potatoes:
a) shifts to the right
b) shifts to the left
c) stays the same
d) shifts to the right and then moves back

(4) Given that chicken and beef are substitute goods, if thepriceof chicken decreases substantially, there would be:
a) an increase in the demand for beef
b) a decrease in the demand for beef
c) a decrease in the quantity for beef demanded
d) no change in the demand for beef

(5) Every day for the past two years you've had ham and cheese onawhole wheat bagel for lunch at Bungalow Bob's BagelBoutique.However, the price of whole wheat bagels has risen by 10cents sotoday you decide to have ham and cheese on rye bagel. Inthis case,whole wheat and rye bagels are best considered:

a) superior goods
b) normal goods
c) substitute goods
d) complementary goods

(6) For most goods, purchases tend to rise with increases inbuyers'incomes and to fall with decreases in buyers' incomes. Suchgoodsare known as:

a) inferior goods
b) direct goods
c) normal goods
d) luxury goods

(7) Economists know that a particular good can be classified asaninferior good if a(n)______ increase in buyers' incomecausesa(n)_____

a) increase; increase in demand
b) increase; increase in quantity demanded
c) increase; decrease in demand
d) decrease; decrease in demand

(8) An increase in the demand for medical services caused byanincrease in the number of people 65 is most likely attributabletowhich demand shifter?

a) income
b) consumer preferences
c) prices of other goods
d) demographic characteristics

(9) Which of the following would shift the demand curve fornewtextbooks to the right?

a) a decrease in the price of paper
b) a fall in the price of used textbooks
c) an increase in college enrollments
d) a fall in the price of new textbooks

(10) How a supply curve is sloped and located depends on:

a) technology
b) resources prices
c) the number of producers or sellers
d) all of the above

(11) A decrease in supply means:

a) a shift to the left of the entire supply curve
b) moving downward (to the left) along the supply curve withlowerprices
c) less will be demanded at every price
d) more will be supplied at every price

greycrocodile249

Please review the following work and correct me if I have mixed up the concepts of movements and shifts of supply and demand curves. Feel free to copy and edit/correct my mistakes. I'll be waiting. Thanks in advance!!

Changes in price dictate movements along demand curves. When a decrease in demand or the quality demanded occurs it's a safe bet that it's correlated to a price increase, which in turn leads to a resultant surplus of that particular commodity in the marketplace. This is because decreased demand means less of that commodity being sold. On the other hand, a price decrease usually leads to an increase in the demand for a particular commodity, or an increase in sales, which in turn leads to a shortage of that commodity in the marketplace.

To shift the demand curve itself, changes need to occur in other aspects of the market beyond simply a change in the price of a commodity. For example, an increase in income means the consumers have more disposable income. With more disposable income, demand for commodities will increase, and results in a shift of the demand curve itself. In this example, the demand curve would shift right. On the opposite side of the coin, cost increases due to production or losses in efficiency may decrease the side of supply, shifting the demand curve to the left.

Analogous to shifts in the demand curve, shifts along a supply curve occur when prices change as well. When the cost to produce a commodity increases, supply drops, and the supply curve shifts to the left. If the cost of production drops, and supply increases, the supply curve shifts to the right as demand develops.

Pharmaceutical supply and demand is an easy way to understand these concepts.

Drug demand increases: Price decreases, supplies decrease.

Drug demand decreases: Price increases, supplies increase.

Drug supply increases: Production costs drop, demand drops.

Drug supply decreases: Production costs increase, demand increases.

"But where and how do movements and shifts occur in the above?"

purpleworm770

ECON101 Lecture Notes - Lecture 5: Economic Equilibrium, Situation Two, Root Mean Square

ECON101 Full Course Notes

Document Summary

Get access

Related Documents

ECON101 Lecture 1: Lecture #1

ECON101 Lecture Notes - Lecture 8: Root Mean Square, Demand Curve

ECON101 Lecture Notes - Lecture 5: Situation Two, Demand Curve, Inferior Good

Related Questions