Question 1

(Advanced analysis) The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q. The equilibrium quantity is

Accepted Answer

To find the equilibrium quantity, set the demand equation equal to the supply equation: 10 - 0.2Q = 2 + 0.2Q. Solving for Q gives Q = 20.

Question 2

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the equilibrium quantity (Q) of X. An increase in the prices of resources used to produce X will

Accepted Answer

An increase in the prices of resources used to produce X will decrease the supply of X because it becomes more expensive to produce. This decrease in supply will lead to an increase in the equilibrium price and a decrease in the equilibrium quantity.

Question 3

Suppose that in 2007, Ford sold 500,000 Mustangs at an average price of $18,800 per car; in 2008, 600,000 Mustangs were sold at an average price of $19,500 per car. These statements

Accepted Answer

The increase in the quantity of Mustangs sold and the increase in the average price between 2007 and 2008 suggest an increase in demand. If demand had decreased, we would expect to see a decrease in the quantity sold, and if supply had increased, we would expect to see a decrease in price. The scenario does not suggest an exception to the law of demand, as the increase in price is consistent with an increase in demand.

Question 4

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the equilibrium quantity (Q) of X. An increase in the price of a product that is a complement to X will

Accepted Answer

An increase in the price of a complement to X will decrease the demand for X, as consumers will be less likely to purchase X if they need to purchase a more expensive complement as well. This decrease in demand will lead to a decrease in the equilibrium price and quantity of X.

Question 5

(Advanced analysis) The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q. If demand changes from P = 10 - .2Q to P = 7 - .3Q, we can conclude that

Accepted Answer

The new demand curve shows a decrease in the quantity demanded for every price. This means that at each price level, buyers are now willing to buy fewer units of the commodity X. Therefore, the demand has decreased. The supply curve is not affected by this change in demand, as it is still represented by the same equation (P = 2 + 0.2Q). Hence, choices C and D are incorrect.

Question 6

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the equilibrium quantity (Q) of X. A reduction in the number of firms producing X will

Accepted Answer

A reduction in the number of firms producing X will decrease the supply of X. This decrease in supply will lead to an increase in equilibrium price (P) of X and a decrease in equilibrium quantity (Q) of X. Therefore, the correct choice is C, which states that a reduction in the number of firms producing X will decrease S, increase P, and decrease Q.

Question 7

Since their introduction, prices of Blu-ray players have fallen and the quantity purchased has increased. This statement

Accepted Answer

The decrease in prices and increase in quantity purchased suggests an increase in supply, as more Blu-ray players are available at lower prices, leading to higher sales.

Question 8

With a downsloping demand curve and an upsloping supply curve for a product, a decrease in resource prices will

Accepted Answer

When there is a decrease in resource prices, the cost of producing the product decreases for the suppliers, leading to an increase in supply. This will cause the supply curve to shift to the right. As a result, the equilibrium price will decrease and equilibrium quantity will increase because the increase in supply will lower the price while increasing the quantity demanded.

Question 9

(Advanced analysis) The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q. If demand changes from P = 10 - .2Q to P = 7 - .3Q, the new equilibrium price is

Accepted Answer

To find the new equilibrium price, set the new demand equation 7 - 0.3Q equal to the supply equation 2 + 0.2Q. Solving 7 - 0.3Q = 2 + 0.2Q gives Q = 10. Substitute Q = 10 into either equation to find P = 4.

Question 10

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the equilibrium quantity (Q) of X. If X is an inferior good, a decrease in income will

Accepted Answer

For an inferior good, demand increases when income decreases. This leads to an increase in both the equilibrium price and quantity of the good.

Question 11

With a downsloping demand curve and an upsloping supply curve for a product, an increase in consumer income will

Accepted Answer

An increase in consumer income will shift the demand curve for a normal good to the right. With a downsloping demand curve and an upsloping supply curve, this will lead to an increase in both equilibrium price and quantity.

Question 12

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the equilibrium quantity (Q) of X. An improvement in the technology used to produce X will

Accepted Answer

An improvement in technology typically increases supply (S) because it allows producers to produce more efficiently. This increase in supply leads to a decrease in the equilibrium price (P) and an increase in the equilibrium quantity (Q) of product X.

Question 13

Data from the registrar's office at Gigantic State University indicate that over the past 20 years tuition and enrollment have both increased. From this information we can conclude that

Accepted Answer

The increase in both tuition and enrollment over the 20-year period at GSU cannot be solely attributed to the law of demand being an exception, nor can it be assumed that the supply curve of education at GSU is downsloping without further information. The most likely explanation is that factors such as school-age population, incomes, and preferences for education have increased over the 20-year period, leading to both an increase in demand for education and an increase in the supply of education offered by GSU.

Question 14

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the equilibrium quantity (Q) of X. Consumer expectations that the price of X will rise sharply in the future will

Accepted Answer

If consumers expect the price of X to rise sharply in the future, they will be incentivized to buy more of X now, which will increase demand (D) for X. This will lead to an increase in equilibrium price (P) and quantity (Q) of X, as the market adjusts to the higher demand for X. Therefore, choice B is the correct answer.

Question 15

(Advanced analysis) The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q. The equilibrium price for X is

Accepted Answer

To find the equilibrium price, we need to set the demand and supply equations equal to each other:
10 - 0.2Q = 2 + 0.2Q
Simplifying this equation:
8 = 0.4Q
Q = 20
Now, we can plug Q = 20 into either the demand or supply equation to find the equilibrium price:
P = 10 - 0.2(20) = $6
Therefore, the equilibrium price for commodity X is $6.

Question 16

Given a downsloping demand curve and an upsloping supply curve for a product, an increase in the price of a substitute good (from the buyer's perspective) will

Accepted Answer

An increase in the price of a substitute good makes the original product more attractive to buyers, leading to an increase in demand. This shifts the demand curve to the right, resulting in a higher equilibrium price and quantity.

Question 17

Over time, the equilibrium price of a gigabyte of computer memory has fallen, while the equilibrium quantity purchased has increased. Based on this we can conclude that

Accepted Answer

The equilibrium price of a good falls when the supply of the good increases relative to the demand for it. The equilibrium quantity purchased of a good increases when quantity demanded increases relative to the quantity supplied. Therefore, if the equilibrium price of computer memory has fallen while the equilibrium quantity purchased has increased, this implies that the supply of computer memory has increased more than the demand for it, which is consistent with option D.

Question 18

(Advanced analysis) The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q. If demand changes from P = 10 - .2Q to P = 7 - .3Q, the new equilibrium quantity is

Accepted Answer

The answer of (Advanced analysis) The demand for commodity X...

Question 19

One can say with certainty that equilibrium price will decline when supply

Accepted Answer

When supply increases and demand decreases, there is an excess of supply in the market which puts pressure on prices. As a result, sellers will be willing to lower prices to sell their products, leading to a decline in equilibrium price.

Question 20

With a downsloping demand curve and an upsloping supply curve for a product, placing an excise tax on this product will

Accepted Answer

Placing an excise tax on a product will increase the cost of production for suppliers, which will cause the supply curve to shift to the left. This will result in a higher equilibrium price and a lower equilibrium quantity. Therefore, the best choice is D.

Quiz 3: Demand, Supply, and Market Equilibrium