ECON 101 Lecture Notes - Lecture 6: Price Ceiling, Problem Set, Shortage

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19 Oct 2017

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First two usually do not result in a true equilibrium: any situation where there are no pressures for price to change, pressure goes into a secondary black market and often results in situations that are worse. This means there will be excess demand and since law prohibits price from rising to go back to equilibrium, this pressure goes to a black market, key fees came into affect- example of pressure going to black market. Even though this sounds like a good idea, this cannot vent into the primary market, this prices everyone from low income out of this market: price floor: legally mandated minimum price. Example #1: agricultural price supports, gov will step in and say there is a support price, gov will buy surplus of good at this price. Suppliers are interested in price support or price floors. Ceiling is below equilibrium while floor will be above equilibrium. These are costs that need to be factored in.

Related Questions

1. For a given change in supply, the more elastic is demand the greater will be A. the change in equilibrium quantity relative to the change in equilibrium price B. the change in equilibrium price relative to the change in equilibrium quantity C. equilibrium price and quantity will change by the same amount D. cannot tell from information given

2. Which of the following is an example of normative economics? A. using the production possibilites model to analyze the problem of scarcity B. determining the change in equilibrium price resulting from a change in demand C. determining the goals for economic policy D. none of the above are examples of normative economics

3. If the demand for a product is price inelastic, then a decrease in price would lead to a increase in quantity demanded but a decrease in total expenditure. True or False

4. If a 10 percent change in price leads to a 20 percent change in quantity demnded, then the price elasticity of demand wuld be equal to two. True or False

5. In terms of the production possibilities frontier, a point lying inside the frontier represents existence of inefficiency in resource use, i.e. producing less than is possible with the resources available. True or False

""Please answer with simple explanations""""Please answer with simple explanations""""Please answer with simple explanations""""Please answer with simple explanations""""Please answer with simple explanations""""Please answer with simple explanations""

1. Which of the following is not characteristic of the demand for a commodity that is elastic?

a. The relative change in quantity demanded is greater than the relative in price

b. Buyers are relatively sensitive to price changes

c. Total revenue declines if price is increased

d. The elasticity coefficient is less than one

2. Suppose the price elasticity of demand for bread is 0.20 if the bread falls by 10 percent, the quantity demanded will increase by:

a. 2 percent and total expenditures on bread will rise

b. 2 percent and total expenditures on bread will fall

c. 20 percent and total expenditures on bread will fall

d. 20 percent and total expenditures on bread will rise

3. If a consumer is equilibrium, an increase in money income will:

a. Move him to a new equilibrium on a lower indifference curve

b. Make his indifferent curves steeper, but will not alter the equilibrium position

c. Have no effect on the equilibrium position because product prices have not change

d. Move him a new equilibrium on a high indifferent curve

4. The larger the coefficient of price elasticity of demand for a product, the:

a. Larger the resulting price change for an increase in supply

b. More rapid the rate at which the marginal utility of that product diminishes

c. Smaller the resulting price change for an increase in supply

5. A manufactures of frozen pizzas found that total revenue decreased when price was lowed from $5to $4. It was also found that total revenue decreased when price was raised from $5 to $6. Thus,

a. The demand for pizza is elastic above $5 and inelastic below $5

b. The demand for pizza is elastic both above and below $5

c. The demand for pizza is inelastic above $5 and elastic below$5

d. $5 is not the equilibrium price of pizza

6. The elasticity of demand for a product is likely to be greater

a. if the product is necessity, rather than a luxury

b. the greater the amount good of time over which buyers adjust to a price change

c. The smaller the proportion of one

rubylizard363

1. In economics, the demand for a good refers to the amount of the good that people:
a. Will buy at alternative income levels
b. Need to achieve a minimum standard of living.
c. Will buy at various prices
d. Would like to have if the good were free
2. The term ceteris paribus means that:
a. What is for the individual is not necessarily true for the whole
b. All variables except those specified are constant
c. Everything is variable
d. No one knows which variables will change and which will remain constant.
3. When economist talk about supply, they are referring to a relationship between price received for each unit sold and the ____________________.
a. Quantity supplied
b. Demand schedule
c. Demand curve
d. Market price
4. But nearly all supply curves share a basic similarity: they slop______________.
a. Up from left to right
b. Down from left to right
c. Up from right to left
d. Down from right to left
5. The nature of demand indicates that as the price of a good increases:
a. Suppliers wish to sell less of it.
b. Buyers desire to purchase less of it
c. More of it is desired
d. More of it is produced
6. Any given demand or supply curve is based on the certeris paribus assumption that _______.
a. Everything is variable
b. All else is held equal
c. No one knows which variables will change and which will remain constant
d. What is true for the individual is not necessary true for the whole.
7. Economist refer to the relationship that a higher price leads to lower quantity demand as the ______________.
a. Price model
b. Law of demand
c. Market equilibrium
d. Income gap
8. A perfect elastic supply curve is:
a. Vertical
b. Downward sloping to the left
c. Horizontal
d. Upward sloping to the right
9. A 10 percent increase in the price of soda leads to a 20 percent increase in the quantity of iced tea demanded. It appears that:
a. Elasticity of demand for iced tea is 2 and is elastic
b. Cross-price elasticity of demand for iced tea is -2
c. Cross-price elasticity of demand for soda is -0.5
d. Elasticity of demand for soda 0.5 AND IS INELASTIC
10. ___________ is the change in what is on the horizontal axis (quantity) divided by the change in what is the vertical axis (price).
a. Elasticity
b. Supply
c. Demand
d. Revenue
11. A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of:
a. The supply curve and the rightward shift of the demand curve resulting in a higher equilibrium price
b. Both the supply and demand curves
c. The supply curve
d. The demand curve, as consumers try to economize because the shortage.
12. Got the answer.
13. A drought decreases the supply of agricultural products, which means that at any given price a lower quantity will be supplied; conversely, especially good weather would shift the _____________.
a. Demand curve to the right
b. Supply curve to the left
c. Supply curve to the right
d. Demand curve to the left
14. Interpret the following statements:

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ECON 101 Lecture Notes - Lecture 6: Price Ceiling, Problem Set, Shortage

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