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Quiz 4 :

Supply and Demand

Quiz 4 :

Supply and Demand

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In the early 2000s, the demand for housing increased substantially asa.What was the likely effect of this on housing prices? Demonstrate graphically. b.In 2005, mortgage rates began increasing. What was the likely effect of this increase on housing prices? Demonstrate graphically. c.In a period of increasing demand for housing, would you expect housing prices to rise more in Miami suburbs, which had room for expansion and fairly
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(a) An increase in the demand leads to an increase in housing prices. People are likely to increase their demand for housing, considering the reduction in the rate of interest. A housingAn increase in demand leads to a rise in housing prices. The graph below represents the effect of an increase in the demand on price. img The above figure shows that an increase in demand causes an increase in price. The increase in demand from img to img causes an increase in the price from img to img . The supply curve increases according to an increase in price.(b) The mortgage rate is the rate of interest charged by the lender of the mortgage. An increase in the mortgage rate leads to an increase in the housing price. The housing price is likely to increase due to an increase in the mortgage rate.
Suppliers housing raise the housing price, considering the increase in the mortgage rate. The graph below represents the effect of an increase in the mortgage rate on the price. img The above figure shows that an increase in the mortgage rate leads to an increase in the price. An increase in the price causes an increase the supply. Suppliers are likely to supply more due to an increase in the price. Price increases to img from img due to an increase in the mortgage rate.(c) In a period of increasing demand for housing, prices are likely to increase in a city that had limited land and tight subdivision restrictions. According to the law of demand and supply, when the supply does not match the demand, prices are likely to increase.Prices do not change in a city where the supply of housing can be changed according to the changes in the demand. Elasticity of supply is considered while determining the housing price. If the supply of housing is inelastic, then the price tends to increase, considering an increase in demand.Hence, the housing price is likely to increase in a city that has limited land and tight subdivision restrictions rather that in a city that has sufficient land and flexible laws about subdivisions.

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Why is a supply/demand analysis that includes only economic forces likely to be incomplete?
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Demand curve is the curve which shows the relationship between quantity demanded and price of the good or service. Supply curve is curve which shows the relationship between quantity supplied and price of the good or service. The intersection of supply a demand curve gives the equilibrium price and quantity.
The fallacy of composition is a scenario where there a false assumption is made about generalization i.e. something that is true for one or some or part, is true for all or whole.
Now, if only economic forces are the only thing considered when demand and supply model is formed then the fallacy of composition will affect the accuracy of this model. To counter this problem, one should consider the political, social and cultural factors as well in the supply and demand model.

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Some economists believe that imposing international labor standards would cost jobs. In support of this argument, one economist said, " Either you believe labor demand curves are downward sloping, or you don ' t. " Of course, not to ' believe that demand curves ate negatively sloped would be tantamount to declaring yourself an economic illiterate. What else about the nature of labor demand curves might help a policy maker design policies that could counteract the negative effects of labor standards employment? (Radical)
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Demand curve is the curve which shows the relationship between quantity demanded and price of the good or service. Supply curve is curve which shows the relationship between quantity supplied and price of the good or service. The intersection of supply a demand curve gives the equilibrium price and quantity.
Like all demand curves the labor demand curve can either shift or move along the curve. Now when there is change in price while all other factors are constant then, there will be movement along the curve and if price is constant and other factors are changing like preferences of firms, future expectation of income, current income, etc. then there will be shifting of demand curve of labor. So, these factors help decide the policy makers make policies and their effects on the Standard employment market.

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State the law of supply. Why is price directly related to quantity supplied?
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Oftentimes, to be considered for a job, you have to know someone in the firm. What does this observation tell you about the wage paid for that job?
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You ' re given the following individual demand tables for comic books. img a.Determine the market demand table. b.Graph the individual and market demand curves. c.If the current market price is $4, what ' s total market demand? What happens to total market demand if price rises to $8? d.Say that an adverting campaign increases demand by50 percent. What will happen to me individual and market demand curves?
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What would be the effect of a 75 percent tax on lawsuit punitive awards that was proposed by California Governor Arnold Schwarzenegger in 2004 on: a.The number of punitive awards. Demonstrate your answer using supply and demand curves. b.The number of pretrial settlements.
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In 1994, the U.S. postal service put a picture of rodeo rider Ben Pickett , not the rodeo star, Bill Pickett , whom it meant to honor, on a stamp. It printed 150,000 sheets. Recognizing its error, it recalled the stamp, but it found that 183 sheets had already been sold. a.What would the recall likely do to the price of the 183 sheets that were sold? b.When the government recognized that it could not recall all the stamps, it decided to issue the remaining ones. What would that decision likely do? c.What would the holders of the misprinted sheet likely do when they heard of the government ' s decision?
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Derive the market supply curve from the following two individual supply curves. img
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Knowledge is derived from a tautology when something is true because you assume it is true. In this chapter, you have learned the conditions under which supply and demand explain outcomes. Yet, as your text author cautions, these conditions may not hold. How can you be sure if they ever hold? (Institutionalist)
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In the late 19th century, Washington Gladden said, " He who battles for the Christianization of society, will find their strongest foe in the field of economics. Economics is indeed the dismal science because of the selfishness of its maxims and the inhumanity of its conclusions. " a.Evaluate this statement. b.Is there a conflict between the ideology of capitalism and the precepts of Christianity? c.Would a society that emphasized a capitalist mode of production benefit by a moral framework that emphasized selflessness rather than selfishness? (Religious)
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List four shift factors of demand and explain how each affects demand.
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You ' re given the following demand and supply tables: img img a.Draw the market demand and market supply curves. b.What is excess supply/demand at price$30? Price 60$? c.Label equilibrium price and quantity.
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Mary has just stated that normally, as price rises, supply will increase. Her teacher grimaces. Why?
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List four shift factors of supply and explain how each affects supply.
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Economics is often referred to as the study of choice. a.In lf.S. history, have men and women been equally free to choose the amount of education they receive even within the same family? b.What other areas can you see where men and women have not been equally free to choose? c.If you agree that men and women have not had equal rights to choose, what implications does that have about the objectivity of economic analysis?(Feminist)
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In a centrally planned economy, how might central planners estimate supply or demand? (Austrian)
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Distinguish the effect of a shift factor of demand on the demand curve from the effect of a change in price on the demand curve.
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State the law of demand. Why is price inversely related to. Quantity demanded?
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Do you think consumers make purchasing decisions based on general rules of thumb instead of price? a.Why would consumers do this? b.What implication might this have for the conclusions drawn about markets?(Post-Keynesian)
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