Be sure to bold the answers, or use a color to make the answers stand out.
1. How will each of the following changes in demand and/or supply affect equilibrium price and equilibrium quantity in a competitive market? That is, will the equilibrium price Rise, Fall, or is the change Indeterminate because this depends on the magnitude of the shift(s). For quantity, does the equilibrium Rise, Fall, or is the change Indeterminate because this depends on the magnitudes of the shift(s)?
NOTE: Drawing the supply and demand graphs will help you determine your answers. However, it is not necessary to show your graphs to receive credit for this assignment. Answers are R, F, or I.
a. Supply decreases and demand is constant. P _____ Q _____
b. Demand decreases and supply is constant. P _____ Q _____
c. Supply increases and demand is constant. P _____ Q _____
d. Demand increases and supply increases. P _____ Q _____
e. Demand increases and supply is constant. P _____ Q _____
f. Supply increases and demand decreases. P _____ Q _____
g. Demand increases and supply decreases. P _____ Q _____
h. Demand decreases and supply decreases. P _____ Q _____
2. What effect will each of the following have on the supply of auto tires (increase, decrease, stay the same)?
a. A technological advance in the methods of producing tires.
b. A decline in the number of firms in the tire industry.
c. An increase in the prices of rubber used in the production of tires.
d. The levying of a per-unit tax on each auto tire sold.
e. The granting of a 50-cent-per-unit subsidy for each auto tire produced.
3. For each stock in the stock market, the number of shares sold daily equals the number of shares purchased. That is, the quantity of each firm's shares demanded equals the quantity supplied. So, if this equality always occurs, why do the prices of stock shares ever change? To answer this question, consider the determinants of demand and the determinants of supply.