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ECO105Y1 (83)
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Chapter 4

Chapter 4 Review Questions.docx

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University of Toronto St. George
Paul Cohen

Chapter 4: Coordinating Smart Choices (Demand and Supply) 4.1- Describe how buyers and sellers compete and cooperate in markets 4.2- Explain how shortages and surpluses affect prices 4.3- Identify how market-clearing prices coordinate the smart choices of consumers and businesses 4.4- illustrate how changes in demand and supply affect market-clearing price and quantities 4.1 What’s a Market? 1. What is a market? 2. You are negotiating with a car dealer over the price of a new car. Explain where competition enters the process and where cooperation enters. 3. The Recording industry association of Americas’ (RIAA) mission is “to foster a business and legal climate that supports and promotes our members…intellectual property rights worldwide.” Have you ever- downloaded music? If so, what arguments do you use to counter RIAA’s defense of property rights. 4.2 Where do prices come from? Price signals from combining supply and demand 1. Define a shortage and explain who competes and what happens to prices. 2. Old navy decides to price a new line of jeans at $75, which covers all marginal opportunity costs as well as a healthy profit margin. If old navy has priced the jeans to high, what signals does the company receive? What actions might old navy take? 3. Most provincial parks charge a fixed price for a camping permit, and allow you to reserve specific campsites well in advance. By the time a summer holiday weekend arrives, all the permits are taken. There is excess demand, and no price adjustment. If you want to reserve your favorite campsite for next year, how do you compete? And whom do you compete a
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