Supply And Demand

Market

Demand schedule

Law of demand

Quantity demanded

Demand curve

Individual demand

Market demand

Nonprice determinant of demand

Change in quantity demanded

Increase/decrease in demand

Normal/inferior good

Substitute(competing) goods

Complementary goods

1. Suppose you are planning to conduct a study of the running shoe market. List the factors that you believe would cause changes in the demand for running shoes. In each case, note whether the relationship would be positive (direct) or negative (inverse). Also list the factors that you believe would affect the supply, again noting the nature of the relationship.

2. In each case below, identify the effect on the market for steak.

(a) An increase in the price of lamb.

(b) A decrease in the population.

(c) An increase in consumer income.

(d) A decrease in the price of steak sauce.

(e) An increase in advertising by chicken producers.

3. What effect will each of the following have on the demand for product X?

a. Product B becomes more fashionable;

b. The price of substitute product S falls;

c. A decline in incomes if X is an inferior good;

d. Consumers anticipate the price of X will be lower in the near future;

e. The price of complementary good C falls;

f. Foreign tariff barriers on X are eliminated;

g. A decline in incomes if X is a normal good;

4. What factors might increase the demand for wheat?

5. Identify whether each of the following involves a shift in the demand curve or a movement along it :

a. Auto sales rise as consumer income rises;

b. Fish prices fall after the Pope allows Catholics to eat meat on Friday;

c. A gasoline tax lowers the consumption of gasoline;

d. After a disastrous wheat blight, bread sales go down;

e. After a disastrous wheat blight, peanut butter and jelly sales go down.

6. True or false? Explain

a. Failure of Brazil's coffee crop will lower the price of coffee, tea, lemon and cream;

b. Fad for long skirts will lower wool price and raise salt price;

c. A new yen for meat will lower the price of grain and raise the price of hide and corn;

d. Development of the sugar beet raised rents on tropical cane lands.

7. The income of a consumer decreases and his/her demand for a particular good increases. What can be concluded?

8. Explain the law of supply. Why does the supply curve slope upward? What are the determinants of supply? Distinguish between a change in supply and a change in the quantity supplied, noting the cause of each.

9. In each case below, identify the effect on the market for coal.

(a) The development of a new, lower cost mining technique.

(b) An increase in wages paid to coal miners.

(c) The imposition of a $2 per ton tax on coal.

(d) A widespread news report that demand for coal will be much lower next year.

(e) A new government regulation requiring air purifiers in all work areas.

11. What effect will each of the following have on the supply of product B?

a. a technological advance in the methods of producing B;

b. a decline in the number of firms in industry B;

c. an increase in the prices of resources required in the production of B;

d. the expectation that the equilibrium price of B will be lower in the future than it is currently.

e. a decline in the price of product A, a good whose production requires substantially the same techniques and resources as does the production of B;

f. the levying of a specific sales tax on B;

g. the granting of a 50-cent per unit subsidy for each unit of B produced.

12. If demand is elastic, price and total revenue are (directly/inverse) related; if demand is inelastic they are...............................related.

13. When the cross elasticity of demand is positive, two products are (complements, substitutes, independent), but when the cross elasticity of demand is negative, they are.... A zero cross elasticity suggests that two products are.......

14. The chief determinant of price elasticity of supply for a product is:

a. the number of good substitutes the products has;

b. the length of time sellers have to adjust to a change in price;

c. whether the product is a luxury or a necessity;

d. whether the product is a durable or nondurable good.

15. A study shows that the coefficient of the cross price of Coke and Sprite is negative. This information indicates that Coke and Sprite are:

a. normal goods;

b. complementary goods;

c. substitute goods;

d. independent goods.

16.