ECON 100A Chapter Notes - Chapter 2: Demand Curve, Shortage, Market Power

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olivecod766

25 Sep 2016

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Chapter 2: the basics of supply and demand. Supply curve: shows quantity of good that producers willing to sell at given price. The higher the price, the more that firms are able and willing to produce and sell. Demand curve: shows how much of good consumers willing to buy as price per unit changes. Substitutes: two goods which a increase in the price of one leads to an increase in qd of the other. Complements: two goods for which an increase in the price of one leads to a decrease in the qd of the other. Equilibrium: price that equates the qs to qd. Market mechanism: tendency in a free market for price to change until the market clears. Surplus: situation in which the qs > qd. Competitive: both sellers and buyers should have little market power. Little ability individually to affect the market price. S and d curves used to trace effects of shifts.

Related Questions

The wheat market is perfectly competitive, and the market supply and demand curves are given by the following equations:

QD=20,000,000-4,000,000P

QS=7,000,000+2,500,000P, where QD and QS are quantity demanded and quantity supplied measured in bushels, and P=price per bushel.

a.) Determine consumer surplus at the equilibrium price and quantity.

b.) Assume that the government has imposed a price floor at $2.25 per bushel and agrees to buy any resulting excess supply. How many bushels of wheat will the government be forced to buy? Determine consumer surplus with the price floor.

taupegerbil480

The generalized demand and supply functions for good X are

Qd = 10 -2Px - 4P_Y + M Qs = 10 + 2P_X

Where:

Q_D = quantity demanded of good X

P_X = price of good X

M = consumer income

P_Y = price of good Y

Q_S = quantity supplied of good X

P_X = price of good X

A. Are good X and good Y substitutes or complements? Why?

B. Is good X a normal good or an inferior good? Why?

C. What is the demand function when P_Y = $4 and M = $600?

d. Use the demand function you found in part c. and solve for the equilibrium price (P_o) and the equilibrium quantity (Q_o).

e. Find the inverse demand function and the inverse supply function.

f. Sketch this market.

periwinklechimpanzee73

Who bears the primary costs of a rent control program?

landlords

renters that get rent-controlled apartments

taxpayers

the wealthy

Assume the demand for sushi is Qd = 180 - 3P, where Qd is quantity demanded and P = price in dollars. The supply of sushi is Qs = 80 + 5P, where Qs is quantity supplied (and P is, again, price in dollars). A price of $20 would result in:

	A.	Excess supply of 60
	B.	Excess supply of 120
	C.	Excess supply of 140
	D.	Excess demand of 140

US agricultural price supports are politically popular because

They have no adverse impacts

The US would have food shortages without them

The benefits accrue to a large number of voters and the costs are paid by a small number of voters

The costs are spread out among millions of people

	A.	$15.50
	B.	$12.50
	C.	$10
	D.	$15

Price floors and ceiling prices:

cause the supply and demand curves to shift until equilibrium is established.

both cause surpluses.

interfere with the rationing function of prices.

A change in the price of a good leads to a change in ________, which leads to a ___________

quantity supplied; shift of the supply curve

supply; shift of the supply curve

quantity supplied; movement along the supply curve

When the supply of a product increases, this implies that

the price of the product first declined

more will be purchased at the same price

producers will be willing to accept a lower price for each unit sold

demand for the good must have increased

producers will offer less for sale at each possible price

If there is a excess demand for product X:

fewer resources will be allocated to the production of this good.

the price of the product will rise.

the supply curve will shift to the left and the demand curve to the right, eliminating the shortage.

the price of the product will decline.

Which of the following will occur when there is a simultaneous decrease in demand and a decrease in supply?

B and D both necessarily occur

An increase in equilibrium quantity

A and C both necessarily occur

An increase in price

A and D both necessarily occur

A decrease in price

A decrease in equilibrium quantity

Velcro is becoming more and more popular for a variety of uses, including as fasteners for shoes. What should happen to the equilibrium price and quantity for shoelaces as a result?

Both price and quantity should decrease.

Price should increase and quantity decrease.

Both price and quantity should increase.

Price should decrease and quantity increase.

Nothing.

If the government imposes a ceiling price on apartment rents, we would expect to observe all of the following except one. Which is the exception?

	A.	conversion of some apartment complexes to condos
	B.	a shortage
	C.	an increase in the number of new apartment complexes being built
	D.	lower maintenance of existing apartments
	E.	long waiting lists for apartment seekers

supply; movement along the supply curve

both cause shortages.

chocolatebadger640

ECON 100A Chapter Notes - Chapter 2: Demand Curve, Shortage, Market Power

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