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01:220:102 Lecture Notes - Lecture 4: Market Clearing, Demand Curve, Economic Equilibrium

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scarletmoose824

21 Sep 2017

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Rutgers University

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Course

Professor

W O N H Y U N G Lee

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01:220:102 Full Course Notes

01:220:102 Full Course Notes

Document Summary

Quantity supplied: the actual amount of a good a seller is willing to sell at a specific price. Supply schedule: shows how much of a good or service would be supplied at a specific price. Supply curve: the relationship between quantity supplied and price. Shift of the supply curve: change in the quantity supplied of a good or service at a specific price. Movement along the supply curve: change in the quantity supplied of a good arising from a change in the price. Shifts in the supply curve are caused by: Changes in the price of related goods or services. Input: a good or services that is used to create another good or service. Individual supply curve: the relationship between quantity produced and price for an individual producer. The market supply curve is the horizontal sum of the individual supply curves. When qsupply = qdemand the market is in equilibrium.

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Related Questions

Match the following terms with their proper definitions.

Potential Matches:

1 : measures the responsiveness of the quantity supplied of a good to changes in the price of that good

2 : a formula that measures the responsiveness along a specific section (arc) of a supply or demand curve and measures the "average" price elasticity between two points on the curve.

3 : measures the responsiveness of the quantity supplied of a good to changes in the price of the related good

: Own-Price Elasticity of Supply

: Cross-Price Elasticity of Supply

: Arc Elasticity

A movement along the supply curve might be caused by a change in:

A. production technology.

B. input prices.

C. expectations about future prices.

D. the price of the good or service that is being supplied.

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.