Study on Microeconomics

#5. Other things equal, what effects would each of the following have on aggregate demand or aggregate supply? In each case use a diagram to show the expected effects on the equilibrium price level and the level of real output.

2. Total revenue falls as the price of a good is raised, if the demand for the good is ( )

Fill in the matrix below and describe how changes in price or quantity of the goods and services affect either supply or demand and the equilibrium price. Use the graphs from your book and the Tomlinson video tutorials as a tool to help you answer questions about the changes in price and quantity

Explain the corresponding impact on total revenue for each of the three price ranges identified in part G.

Fill in the matrix below and describe how changes in price or quantity of the goods and services affect either supply or demand and the equilibrium price. Use the graphs from your book and the Tomlinson video tutorials as a tool to help you answer questions about the changes in price and quantity

2. When the percentage change in the quantity demanded equals the percentage change in price, then demand is

6. In a monopolistic competition industry, if one firm appreciably increased its price from the existing equilibrium price, which of the following outcomes would most likely ensue?

Apple juice and orange juice are substitutes for consumers, so the fall in the price of apple juice decreases the demand for orange juice. The demand curve for orange juice shifts leftward. The increase in the wage rate paid to orange grove workers raises the cost of producing orange juice. The supply of orange juice decreases and the supply curve of orange juice shifts leftward. The net effect of these events decreases the equilibrium quantity but has an undetermined effect on equilibrium price. If supply decreases by more than the demand, the shift in the

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__________________

You could answer this in 2 ways. (1) You could calculate the elasticity in the $15 - $10 range. This is [(100 - 40) / 140] / [(15 - 10) / 25] = [60 / 140] / [5 / 25] = 0.42 / 0.20 = 2.1. Since we have elastic demand in this range we know that to lower the price the total revenue will RISE. or (2) You could simply calculate the total revenue at the two prices -- at $15 total revenue is $15 x 40 = $600, and at $10, total revenue is $10 x 100 = $1000. So obviously total revenue RISES when the price is lowered from $15 to $10.

B) no government regulations exist. C) demand curves are perfectly horizontal. D) suppliers will supply any amount that buyers wish to buy. Answer: A 19) Once an equilibrium is achieved, it can persist indefinitely because A) shocks that shift the demand curve or the supply curve cannot occur. B) shocks to the demand curve are always exactly offset by shocks to the supply curve. C) the government never intervenes in markets at equilibrium. D) in the absence of supply/demand shocks no one applies pressure to change the price. Answer: D 20) If price is initially above the equilibrium level, A) the supply curve will shift rightward. B) the supply curve will shift leftward. C) excess supply exists. D) all firms can sell as much as they want. Answer: C 21) An equilibrium in a market is described by A) a price only. B) a quantity only. C) the excess supply minus the excess demand. D) a price and a quantity. Answer: D 3

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?

Figure 2 demonstrate how any change in one of the other determinants causes demand to rise or to fall by shifting the whole curve to the right or the left. Other factors that determinates of demand

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.