Question 1

Suppose a negative technological change in the production of disease-resistant wheat caused the price of wheat to rise.Holding everything else constant, how would this affect the market for corn (a substitute for wheat)?

Accepted Answer

Since wheat and corn are substitutes, an increase in the price of wheat would lead to a higher demand for corn as consumers switch to the cheaper alternative. This would result in an increase in demand for corn, which would lead to a shift in the demand curve to the right, causing the equilibrium price of corn to increase. Option A is incorrect because the supply of corn is not affected by a change in the price of wheat. Options C and D do not follow the law of demand, which states that when the price of a good increases, the demand for that good decreases, and vice versa.

Question 2

If the demand for a product increases and the supply of the same product increases, the equilibrium price will increase.

Accepted Answer

The equilibrium price depends on the relative magnitudes of the shifts in demand and supply. If both increase, the equilibrium price could rise, fall, or remain unchanged depending on which shift is larger.

Question 3

In 1984, the National Minimum Drinking Age Act was passed, raising the legal age to consume alcoholic beverages in the United States to 21.In much of Europe, the legal age to consume alcohol is 18.If the legal drinking age in the United States was changed back to 18, how would this affect the market for alcoholic beverages? What would happen to the equilibrium price and quantity of alcoholic beverages?

Accepted Answer

The answer of In 1984, the National Minimum Drinking Age...

Question 4

A growing number of cigar manufacturers in the Caribbean and Central America have begun producing and exporting cigars to the U.S.market.How has this affected the equilibrium price and quantity of cigars?

Accepted Answer

The answer of A growing number of cigar manufacturers in...

Question 5

Studies have shown that drinking one glass of red wine per day may help prevent heart disease.Assume this is true, and favorable weather has increased the grape harvest of California vineyards.In the market for red wine, these two developments would

Accepted Answer

The answer of Studies have shown that drinking one glass...

Question 6

As the number of firms in a market increases, the supply curve will shift to the right and the equilibrium quantity will rise.

Accepted Answer

With more firms entering the market, the overall supply of goods or services will increase, causing the supply curve to shift to the right. As a result, the equilibrium quantity will rise to a new equilibrium point where the supply and demand curves intersect.

Question 7

As the number of firms in a market decreases, the supply curve will shift to the left and the equilibrium price will rise.

Accepted Answer

This is because with fewer firms, there will be less competition, resulting in less supply and higher prices.

Question 8

If the number of firms producing mouthwash increases and consumer preference for mouthwash increases, the equilibrium price of mouthwash will definitely increase.

Accepted Answer

An increase in the number of firms producing mouthwash increases supply, which tends to lower prices, while increased consumer preference raises demand, which tends to increase prices. The net effect on equilibrium price depends on the relative magnitudes of these changes in supply and demand.

Question 9

If the demand curve for a product shifts to the left and the supply curve for the product shifts to the left, the equilibrium quantity will decrease.

Accepted Answer

When both the demand and supply curve shift to the left, it means that both the quantity demanded and the quantity supplied of the product have decreased. As a result, there is an excess supply of the product in the market, which causes the price to fall. The new equilibrium point will have lower both price and quantity, with quantity decreasing as a result of the shifts in both demand and supply curves.

Question 10

Discuss the correct and incorrect economic analysis in the following statement.
"The United Auto Workers Union has successfully negotiated a 9 percent increase in wages for its workers.This increase in the wage rate causes an increase in demand for automobiles, since many consumers now have greater incomes, and also a decrease in the supply of automobiles because the cost of production has increased.These effects cancel each other out resulting in no change in equilibrium price and quantity in the automobile market."

Accepted Answer

The answer of Discuss the correct and incorrect economic analysis...

Question 11

Explain how it would be possible for the equilibrium price and equilibrium quantity to both increase in the market for motorcycles if consumer preference for motorcycles increases and the number of motorcycle manufacturers decreases.

Accepted Answer

The answer of Explain how it would be possible for...

Question 12

Article Summary
World Tourism Day 2017, with its official celebration on September 27 in Qatar, was focused on sustainable tourism. Established by the United Nations World Tourism Organization (UNWTO), World Tourism Day has been celebrated since 1980, and the theme for 2017 was the "International Year of Sustainable Tourism for Development." The event was designed with two sessions: one focused on 'Tourism as a driver of economic growth', and the other 'Tourism and the Planet: committed to a greener future'. With over 1.2 billion travellers crossing international borders in 2016, and that number expected to grow to 1.8 billion by 2030, sustainable tourism is viewed by many as an important catalyst for diversification and economic growth.
Source: Vicky Karantzavelou, " World Tourism Day 2017 celebrated on the theme Sustainable Tourism - a Tool for Development," traveldailynews.com, August 14, 2017
-Refer to the Article Summary.Assume that more global tourist destinations begin to offer and publicize sustainable tourism to American tourists and, due to the growing number of millennials attracted to sustainability, more Americans choose to embrace sustainable tourism.All else equal, what will happen in the market for sustainable tourism as a result of these two factors?

Accepted Answer

More American tourists embracing sustainable tourism will increase demand for sustainable tourism services. Offering and publicizing sustainable tourism to American tourists will increase the supply of sustainable tourism destinations. Therefore, both demand and supply will increase in the market for sustainable tourism.

Question 13

If the demand for a product increases and the supply of the product does not change, equilibrium price and equilibrium quantity will both increase.

Accepted Answer

When the demand for a product increases, the demand curve shifts to the right, causing an increase in both equilibrium price and equilibrium quantity. This is because at the initial equilibrium price, there is excess demand for the product, leading to upward pressure on prices. As prices increase, suppliers increase production, leading to an increase in equilibrium quantity as well.

Question 14

Discuss the correct and incorrect economic analysis in the following statement.
"If good weather in Hawaii creates a bumper crop of pineapples, the supply of pineapples will increase.This will result in a price decrease, which will then cause the supply of pineapples to decrease."

Accepted Answer

The answer of Discuss the correct and incorrect economic analysis...

Question 15

If a union successfully negotiates for higher wages and benefits for steel workers, what impact would this have on supply and demand in the market for steel, assuming no other changes take place in this market?

Accepted Answer

The answer of If a union successfully negotiates for higher...

Question 16

Let D = demand, S = supply, P = equilibrium price, and Q = equilibrium quantity.What happens in the market for electric vehicles if the government offers incentives to manufacturers to produce more electric vehicles?

Accepted Answer

Government incentives to manufacturers increase the supply of electric vehicles, leading to a decrease in equilibrium price and an increase in equilibrium quantity, while demand remains unchanged.

Question 17

A decrease in the demand for incandescent light bulbs due to changes in consumer tastes, accompanied by a decrease in the supply of incandescent light bulbs as a result of government restrictions, will result in

Accepted Answer

A decrease in both demand and supply will lead to a decrease in the equilibrium quantity of incandescent light bulbs. However, the change in equilibrium price is uncertain and depends on the extent of the shifts in demand and supply. If the decrease in demand is greater than the decrease in supply, the equilibrium price will decrease as well. However, if the decrease in supply is greater than the decrease in demand, the equilibrium price will increase. Therefore, there is no conclusive evidence to support option A or B, and option C is not likely as the decrease in demand is likely to offset any potential price decrease resulting from the decrease in supply.

Question 18

Suppose favorable weather resulted in a bumper crop of oranges in Florida.In the market for oranges

Accepted Answer

An increase in the supply of oranges, as stated in the question, would shift the supply curve to the right. This means there is now a greater quantity of oranges available at every price level. As a result, the equilibrium price would decrease (moves down the demand curve) as producers would need to lower prices to make sales in the face of greater competition with more supply available. Therefore, Choice A is the correct answer.

Question 19

If the population increases and input prices decrease, the equilibrium quantity of a product will definitely increase.

Accepted Answer

If the population increases, there will be more demand for the product and if input prices decrease, it will lower the cost of production. As a result, the equilibrium quantity will increase as the market will be able to supply more of the product at a lower cost.

Question 20

If the demand for a product decreases and the supply of the same product decreases, the equilibrium price will decrease.

Accepted Answer

When both demand and supply decrease, the equilibrium price cannot be predicted solely based on this information. It will depend on the degree of decrease in both demand and supply. If the decrease in demand is greater than the decrease in supply, the equilibrium price will decrease. If the decrease in supply is greater than the decrease in demand, the equilibrium price will increase. If the decrease in both is equal, the equilibrium price will remain the same.

Quiz 3: Where Prices Come From: the Interaction of Demand and Supply

Suppose a negative technological change in the production of disease-resistant wheat caused the price of wheat to rise.Holding everything else constant, how would this affect the market for corn (a substitute for wheat) ?