Economics Test Questions

For now, let’s look at how the number of Starbucks (supply) impacted the demand for this product. Supply and demand have an inverse relationship. This means that as supply increases, demand decreases and vice versa. Starbucks presents an interesting example at how this concept works (Miller, 69).

-Mohair farmers have earned a subsidy from the federal government for decades because the mohair farmers can get large payments from the government without taxpayers ever really noticing because the farmers who get the subsidy care a lot about it, while the rest of us taxpayers (paying mere pennies extra in taxes) do not really care. And, “any politician with a preference for job security can calculate that a vote for the mohair subsidy will earn the strong support of the mohair farmers while costing nothing among other voters” (Wheelan 177).

Law of Supply: Price and quantity has a direct relation, when price increases, quantity also increases. When the price of oranges increases, farmers

So when demand increases and a supply doesn’t change, a shift in price will happen. This shift will move to the right causing a new Equilibrium.

The new audio greeting message affects the demand for greeting cards. The demand for greeting cards decreases because greeting cards and audio greeting cards are substitutes. The demand curve for greeting cards pads shifts leftward, from D0 to D1 in Figure 4.6. Simultaneously the fall in the cost of producing a greeting card affects the supply. The fall in the cost of producing greeting cards increases the supply and the supply curve shifts rightward, from S0 to S1 in Figure 4.6. At the initial price of a greeting card, $5.00 in Figure 4.6, there is a surplus of 60 greeting cards per week. The surplus forces the price lower, so the equilibrium price of a greeting card

What happens to the equilibrium price and quantity after these changes are put into effect? Do they go up, down or stay the same?P:_____down_____________Q:_____down__________________

It is basic economic principle that states that when there is an oversupply of a good or service, prices fall. When there is a high demand, prices tend to rise.

10 pts draw and explain increase in technology and how it effects the graph: Supply increases so it is cheaper to produce. The supply curve shifts to the right because more quantity produced. Price also decreases.

cause a leftward shift of the new auto demand curve because they are a normal good. c.

This causes the price and the quantity move in opposite directions in a supply curve shift. Also, if the quantity supplied decreases at any given price the opposite will happen.

The price adjusts to rise when the quantity demanded exceeds the quantity supplied and for price to fall when the quantity supplied exceeds the quantity demanded is a central elements to supply and demand. Although individuals tendencies to change prices exist as quantity supplied and quantity demanded differ the changes in price brings the law of supply and demand into play. Whenever the quantity supplied and quantity demanded are unequal, price will stay the same cause no one will have an incentive to change. One thing to remember equilibrium is not the model framework they use to look at the world. Although to establishing the current value of a consumer product Economics has evolved through the centuries there are a few factors that led to a change in

In addition to the law of demand, the law of supply also serves as the second major resource in studying economics. The law of supply states that with other factors remaining constant, as the price rises, the quantity of the product supplied also rises. Conversely, as the price falls, quantity of the product supplied also falls (Colander, 2006, p 97). The law of supply is refers to how producers can effectively substitute the production of one product for another (Colander, 2006, p.

Evaluate each of the following changes in supply and/or demand. How will each affect equilibrium price and quantity in a competitive market? Will price and quantity rise, fall, or be unchanged? Based on shifts, will the answers be indeterminate?

Using appropriate diagrams, discuss how an increase or an improvement in the following non-price determinants of supply would change equilibrium prices and quantities.

Like the law of demand, the law of supply demonstrates the quantities that will be sold at a certain price. But unlike the law of demand, the supply relationship shows an upward slope. This means that the higher the price, the higher the quantity supplied. Producers supply more at a higher price because selling a higher quantity at a higher price increases revenue.