The Market at Work: Supply and Demand

1. 3 The Market at Work: Supply and Demand

2. Practice What You Know— Demand Quiz 2 • The following three questions are considering the market for the same good. • The good in question is PEPSI. • We are considering: • Change in quantity demanded (movement), and • Change in demand (shift).

3. Practice What You Know— Demand Quiz 2 • Assume you like Pepsi, and your income increases. • The demand for Pepsi increases. • The demand for Pepsi decreases. • The quantity demanded for Pepsi increases. • The quantity demanded for Pepsi decreases.

4. Practice What You Know— Demand Quiz 2 • Assume the price of Pepsidecreases. • The demand for Pepsi increases. • The demand for Pepsi decreases. • The quantity demanded for Pepsi increases. • The quantity demanded for Pepsi decreases.

5. Practice What You Know— Demand Quiz 2 • Assume the price of Cokedecreases. • The demand for Pepsi increases. • The demand for Pepsi decreases. • The quantity demanded for Pepsi increases. • The quantity demanded for Pepsi decreases.

6. Practice What You Know—Supply Quiz • Assume the price of cheese decreases. What will happen in the pizza market? • The supply of pizza increases. • The supply of pizza decreases. • The quantity supplied of pizza increases. • The quantity supplied of pizza decreases.

7. Practice What You Know—Supply Quiz • Which of the following will cause the supply curve for oranges to shift to the left? • The government begins subsidizing orange growers. • A study showing oranges improve eyesight • Ice storm strikes Florida • A new orange juice commercial airs on TV.

8. Practice What You Know—Supply Quiz • In general, why would the government enact tougher pollution standards or tax a polluting firm? • Pollution is bad! • Political reasons • Encourage the firm to invest in cleaner production methods • All of the above

9. Practice What You Know Suppose the price of good X increases. In terms of demand, what is the result? • The demand for X increases. • The demand for X decreases. • The quantity demanded of X increases. • The quantity demanded of X decreases.

10. Practice What You Know Suppose goods X and Y are substitutes for each other. If the price of good Y increases, what is the result in the market for good X? • The demand for X increases. • The demand for X decreases. • The quantity demanded of X increases. • The quantity demanded of X decreases.

11. Practice What You Know • Suppose there is a shortage in the market for avocados. Assuming a competitive and unrestrained market, what happens over time? • The price of avocados will fall, and the shortage will worsen. • The price of avocados will rise, and the market will eventually reach equilibrium. • The price of avocados will rise, and a large surplus will be created. • Producers will stop growing avocados.

12. Practice What You Know Consider the market for bananas. Suppose that both the supply and demand for bananas increases simultaneously. Which of these effects is certain? • The equilibrium price of bananas will increase. • The equilibrium price of bananas will decrease. • The equilibrium quantity of bananas will increase. • The equilibrium quantity of bananas will decrease.

13. Practice What You Know Which of the following will most likely cause a decrease in the supply of most fruits and vegetables? • an increase in demand for meat • the introduction of an environmentally friendly pesticide • a decrease in the price of corn and rice • harsh punishments for farmers that hire undocumented workers