The power of the supply and demand model lies in its ability A) to generally predict how price and quantity will change with supply and demand shocks. B) to precisely predict the impact of government regulations on quantity and price. C) to precisely determine the difference between price ceilings and price floors. D) to generally […]
The change in price that results from a leftward shift of the supply curve will be greater if A) the demand curve is relatively steep than if the demand curve is relatively flat. B) the demand curve is relatively flat than if the demand curve is relatively steep. C) the demand curve is horizontal than […]
Suppose the market for potatoes can be expressed as follows: Supply: QS = -20 + 10p Demand: QD = 400 – 20p Suppose the government restricts the quantity to 100 units. What will be the price of potatoes? What will be an ideal response? ANSWER (1 ) Find the inverse supply curve: p = […]
It is appropriate to use the supply-and demand-model if, in a market, A) everyone is a price taker with full information about the price and quality of the good. B) firms sell identical products. C) costs of trading are low. D) All of the above. ANSWER D
Explain why the supply-and-demand model should not be used to analyze the market for jeans. What will be an ideal response? ANSWER Products in the jeans market are not identical (at least not in the consumers’ eyes). The fact that there is only one manufacturer per brand gives that particular firm (limited) power over […]
The supply-and-demand model may not be appropriate in markets with large transaction costs. Indicate whether the statement is true or false ANSWER True . If the costs of finding a trading partner are high, no trades may occur, or trades may occur at a variety of prices.
One of the biggest benefits of the Internet auction site eBay A) is its control over prices. B) is that it increases the supply of products. C) is that it increases the demand for products. D) is that it reduces transaction costs for both sellers and buyers. ANSWER D
The change in price that results from a rightward shift in demand will be greater if A) the supply curve is horizontal than if the supply curve is upward sloping. B) the supply curve is relatively steep than if the supply curve is relatively flat. C) the supply curve is upward sloping than if the […]
It is appropriate to use the supply-and-demand model in which of the following markets? A) beer market B) car market C) wheat market D) market for breakfast cereal ANSWER C
Understanding the supply and demand model facilitates A) greed. B) charity. C) happiness. D) prediction. ANSWER D
