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Exam 3: Where Prices Come From: the Interaction of Demand and Supply

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Question 111

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Behavioural economics helps explain why customers ________ at Big W.

A) favoured the policy of everyday low prices and not sales and coupons
B) favoured sales and coupons and not the policy of everyday low prices
C) were equally happy with sales and coupons and the policy of everyday low prices
D) responded negatively to both sales and coupons and the policy of everyday low prices

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Question 112

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Explain the difference between a normal good and an inferior good.

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A normal good is something for which the...

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Question 113

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Select the phrase that correctly completes the following statement.'A positive change in technology caused an increase in the supply of flat-screen televisions; as a result,________.'

An increase in the demand for lobster due to changes in consumer tastes,accompanied by a decrease in the supply of lobster as a result of bad weather reducing the number of fishermen trapping lobster,will result in

A common mistake made by consumers is the failure to take into account the monetary costs of their actions.

In each of the following situations,list what will happen to the equilibrium price and the equilibrium quantity for a particular product,which is an inferior good. a.The population increases and productivity increases. b.Income increases and the price of inputs decrease. c.The number of firms in the market decreases and income increases. d.Consumer preference increases and the price of a complement decreases. e.The price of a substitute in consumption decreases and the price of a substitute in production decreases.

Harvey Rabbitt pays for monthly cable TV service.Last week the cable company informed Harvey that his monthly cable price would go down because the city council has granted approval for three new cable companies to service his area.How is the market for cable TV services affected by this?

Figure 3-1 -Refer to Figure 3-1.If the product represented is an inferior good,an increase in income would be represented by a movement from

Figure 3-2 -Refer to Figure 3-2.A decrease in the price of the product would be represented by a movement from

A shortage is defined as the situation that exists when the quantity of a good supplied is greater than the quantity demanded.

If an increase in income leads to an increase in the demand for peanut butter,then peanut butter is

A change in supply is represented by a shift of the supply curve.

Some online penny auctions charge a fee,such as $1,for every bid placed.Why should these costs of $1 per bid be considered sunk costs? Would it be smart for someone who has 'already invested $5 in bidding costs' to keep bidding to 'protect his or her sunk investments'? Why or why not?

Draw a supply and demand graph showing an equilibrium price of $50 and an equilibrium quantity of 200 units.Explain what would happen if the selling price was $75,and illustrate this on the graph.Explain what would happen if the selling price was $25,and illustrate this on the graph.Be sure to label each axis and curve on the graph.

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for sugar at the intersection of D₁ and S₁ (point A) If there is an increase in the price of fertiliser used on sugar cane and there is a decrease in tastes for sugar-sweetened soft drinks, how will the equilibrium point change?

The internet has created a new category in the book-selling market,namely,the 'barely used' book.How does the availability of barely used books affect the market for new books?

Figure 3-4 -Refer to Figure 3-4.At a price of $10,how many units will be sold?

If the demand curve for a product shifts to the left and the supply curve for the product shifts to the left,the equilibrium quantity will decrease.

Which of the following would cause the equilibrium price of white bread to decrease and the equilibrium quantity of white bread to increase?

Figure 3-4 -Refer to Figure 3-4.If the current market price is $10,the market will achieve equilibrium by