Income and substitution effects
Jamal is a bike messenger who enjoys donuts and muffins. Suppose that the price of donuts increases. As a result, even though Jamal purchases fewer donuts, he actually purchases more muffins than he would have before the price change. This phenomenon is known as the ________ effect.
Determinants of demand
The following graph shows the demand curve for sedans (for example, Toyota Camrys or Honda Accords) in New York City. For simplicity, assume that all sedans are identical and sell for the same price. Initially, the graph shows market demand under the following circumstances: Avenge household income is $50,000 per year, the price of a subway ride is $2.00 per ride.
Use the graph (attached) input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.
Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.
Consider the graph. Suppose that the price of a sedan decreased from $20,000 to $15,000. This would cause a _______ the demand cure.
An increase in avenge income causes a rightward _______ the demand curve; therefore, you may conclude that sedans are ______ good. (Hint: Try substituting different values for Average Income in the graph input tool and observing what happens.)
Suppose that the price of a subway ride falls from $2.00 to $1.50. Because driving a car and taking the subway are _________, a decrease in the price of a subway ride shifts the demand curve for sedans to the _________.
Complete the following table by selecting the term that matches each definition.
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Definition
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Quantity Supplied
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Supply Curve
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Supply Schedule
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Law of Supply
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The claim that, other things being equal, the quantity supplied of a good increases when the price of that good rises.
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A table showing the relationship between the price of a good and the amount of it that sellers are willing and able to supply at various prices.
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A graphical object showing the relationship between the price of a good and the amount that sellers are willing and able to supply at various prices.
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The amount of a good that sellers are willing and able to supply at a given price.
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Apply your understanding of the previous key terms by completing the following scenario with the appropriate terminology. Your professor claims that one of the curves found on the following graph correctly illustrates the supply curve for CDs:
Because you understand of law of supply, you can deduce that the correct graphical representation of the supply for CDs must be ____. Morever, you know that at a price of $10 per CD, the ______ is five million CDs.
Changes in the supply of sedans
The following calculator shows the supply curve for sedans in an imaginary market. For simplicity, assume that all sedans are identical and sell for the same price. Two factors that affect the supply of sedans are the level of technical knowledge-in this case, the speed with which manufacturing robots can fasten bolts, or robot speed-and the wage rate that auto manufacturers must pay their employees. Initially, the graph shows the supply curve when robots can fasten 2,500 bolts per hour and autoworkers earn $25 per hour.
Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.
Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.
Consider the previous graph. Suppose that the price of a sedan increases from $20,000 to $25,000. This would cause the ______ of sedans to increase, which is reflected on the graph by a ______ the supply curve.
Suppose the workers union negotiates a pay raise. This causes a _______ the supply curve because the pay raise makes cars __________.
Market equilibrium
The following table shows the weekly demand and supply in the market for ice cream in San Francisco.
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Price (Dollar per gallon of ice cream)
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Quantity Demanded (Gallon of ice cream)
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Quantity Supplied (Gallon of ice cream)
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4
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2,000
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200
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8
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1,600
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600
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12
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1,200
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800
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16
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800
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1,200
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20
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400
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1,800
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Based on the preceding table, plot the demand for ice cream on the following graph using the blue points (circle symbol). Next, plot the supply of ice cream using the orange points (square symbol). Finally, use the black point (cross symbol) to indicate the equilibrium price and quantity in the market for ice cream.
Movements along versus shifts of demand curves
Consider the market demand for hot dogs.
Complete the following table by indicating whether an event will cause a movement along the demand curve for hot dogs or a shift of the demand curve for hot dogs, holding all else constant.
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Event
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Movement Along
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Shift
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A decrease in the number of consumers
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An increase in the price of hot dogs
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A change in tastes of consumers that makes them desire more hot dogs
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You can use the graph below to see the difference between movements along the demand curve and shifts of the demand curve. Select and drag the point or the curve o the desired position. The point and the curie will snap into position, so if you try to move one and it snaps back to its original position, just drag it a hale farther. You will not be graded on any changes you make to this graph.
The market price of cheeseburger college town increased recently, and the students in an economics class are debating the cause of the price increase. Some students suggest that the price increased because the price of beef, an important ingredient for making cheeseburger, has increased. Other students attribute the increase in the price of cheeseburger to a recent increase in the price of calzones at local pizza parlors.
Everyone agrees that the decrease in the price of calzones was caused by a recent decrease in the price of pizza dough, which is not generally used in making cheeseburgers. Assume that burger joints and pizza parlors are entirely separate entities-that is, there aren't places that serve both cheeseburgers and calzones.
The first group of students thinks the decrease in the price of cheeseburgers is due to the fact that the price of beef, an important ingredient for making cheeseburgers, has decreased.
On the following graph, adjust the supply and demand curves to illustrate the first group's explanation for the increase in the rice of cheeseburger.
Suppose that both of the events you analyzed above are partly responsible for the decrease in the price of cheeseburgers. Based on your analysis of the explanations offered by the two groups of students, how would you figure out which of the possible causes was the dominant cause of the decrease in the price of cheeseburgers?
If the equilibrium quantity of cheeseburgers decreases, then the supply shift in the market for cheeseburgers must have been larger than the demand shift.
If the price decrease was large, then the supply shift in the market for cheeseburgers must have been larger than the demand shift.
If the equilibrium quantity of cheeseburgers decreases, then the demand shift in the market for cheeseburgers must have been larger than the supply shift.
Whichever change occurred first must have been the primary cause of the change in the price of cheeseburgers.
The following graph shows the labor market in the fast-food industry in the fictional town of Supersize City.
Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.
Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.
In this market, the equilibrium hourly wage is ______, and the equilibrium quantity of labor is _______ thousand workers.
Suppose a senator introduces a bill to legislate a minimum hourly wage of $6. This type of price control is called a _______.
For each of the wages listed in the following table, determine the quantity of labor demanded, the quantity of labor supplied, and the direction of pressure exerted on wages in the absence of any price controls.
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Wage (Dollars per hour)
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Labor Demanded (Thousands of workers)
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Labor Supplied (Thousands of workers)
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Pressure on Wages
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12
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8
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True or False: A minimum wage below $10 per hour is a binding minimum wage in this market. (Economics call a minimum wage that prevents the labor market from reaching equilibrium a binding minimum wage.)
Price control in the Florida orange market
The following graph shows the annual market for Florida oranges, which are sold in units of 90-pound boxes.
Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.
Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.
In this market, the equilibrium price is $ ____ per box, and the equilibrium quantity of oranges is ______ million boxes.
For each of the prices listed in the following table, determine the quantity of oranges demanded, the quantity of oranges supplied, and the direction of pressure exerted on prices in the absence of any price controls.
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Price (Dollars per box)
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Quantity Demanded (Millions of boxes)
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Quantity Supplied (Millions of boxes)
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Pressure on Prices
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20
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30
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True or False: A price ceiling above $25 per box is not a binding price ceiling in this market.
Because it takes many years before newly planted orange trees bear fruit, the supply curve in the short run is almost vertical. In the long run, farmers can decide whether to plant oranges on their land, to plant something else, or to sell their land altogether. Therefore, the long-run supply of oranges is much more price sensitive than the short-run supply of oranges.
Assuming that the long-run demand for oranges is the same as the short-run demand, you would expect a binding price ceiling to result in a ________ that is_________ in the long run than in the short run.
Demand terminology
Complete the following table by selecting the term that matches each definition.
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Quantity Demanded
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Demand Curve
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Demand Schedule
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Law of Demand
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The amount of a good that buyers are willing and able to purchase at a given price.
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A table showing the relationship between the price of a good and the amount that buyers are willing and able to purchase at various prices.
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The claim that, other things being equal, the quantity demanded of a good falls when the price of that good rises.
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A graphical representation of the relationship between the price of a good and the amount of the good that buyers are willing and able to purchase at various prices.
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Apply your understanding of the previous key terms by completing the following scenario with the appropriate terminology.
Your boss would like help on a marketing research project she is conducting on the relationship between the price of juice and quantity of juice demanded. He hands you the following document:
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Price of Juice (Dollars per can)
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Quantity of Juice Demanded (Billions of cans)
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0.50
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2,000
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0.75
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1,500
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1.00
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1,000
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1.25
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750
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Your task is to take this _____ and construct a graphical representation of the data. In doing so, you determine that as the price of juice rises, the quantity of juice demanded decrease. This confirms the ________.
Note - All graphs are attached.
Attachment:- Assignment File.rar