Chapter 3, Individual Markets Demand and Supply Video Solutions, Microeconomics

Problem 1

Explain the law of demand. Why does a demand curve slope downward? What are the determinants of demand? What happens to the demand curve when each of these determinants changes? Distinguish between a change in demand and a change in the quantity demanded, noting the cause(s) of each.

Ansh Varma

Numerade Educator

03:06

Problem 2

What effect will each of the following have on the demand for product $\mathrm{B}$ ?
a. Product $\mathrm{B}$ becomes more fashionable.
b. The price of substitute product $C$ falls.
c. Income declines and product B is an inferior good.
d. Consumers anticipate the price of B will be lower in the near future.
e. The price of complementary product D falls.
f. Foreign tariff barriers on product B are eliminated.

Md.Daniyal Arshad

Numerade Educator

03:13

Problem 3

Explain the following news dispatch from Hull, England: "The fish market here slumped today to what local commentators called 'a disastrous level'-all because of a shortage of potatoes. The potatoes are one of the main ingredients in a dish that figures on almost every café-menu-fish and chips."

Cindy B

Numerade Educator

11:56

Problem 4

Explain the law of supply. Why does the supply curve slope upward? What are the determinants of supply? What happens to the supply curve when each of these determinants changes? Distinguish between a change in supply and a change in the quantity supplied, nothing the cause(s) of each.

Ansh Varma

Numerade Educator

06:37

Problem 5

What effect will each of the following have on the supply of product B?
a. A technological advance in the methods of producing product $B$.
b. A decline in the number of firms in industry B.
c. An increase in the prices of resources required in the production of $B$.
d. The expectation that the equilibrium price of $B$ will be lower in the future than it is currently.
e. A decline in the price of product A, a good whose production requires substantially the same techniques and resources as does the production of B.
f. The levying of a specific sales tax on B.
g. The granting of a 50-cent per-unit subsidy for each unit of B produced.

Ansh Varma

Numerade Educator

02:16

Problem 6

"In the corn market, demand often exceeds supply and supply sometimes exceeds demand." "The price of corn rises and falls in response to changes in supply and demand." In which of these two statements are the terms supply and demand used correctly? Explain.

Natalie Britton

Numerade Educator

07:10

Problem 7

Suppose the total demand for wheat and the total supply of wheat per month in the Winnipeg grain market are as follows:
$$
\begin{array}{cccc}
\begin{array}{c}
\text { Thousands } \\
\text { of bushels } \\
\text { demanded }
\end{array} & \begin{array}{c}
\text { Price per } \\
\text { bushel }
\end{array} & \begin{array}{c}
\text { Thousands } \\
\text { of bushels } \\
\text { supplied }
\end{array} & \begin{array}{c}
\text { Surplus (+) } \\
\text { or } \\
\text { shortage (-) }
\end{array} \\
\hline 85 & \$ 3.40 & 72 & \\
80 & \$ 3.70 & 73 & \_\_\_\_\_\_\_\_ \\
75 & \$ 4.00 & 75 & \_\_\_\_\_\_\_\_ \\
70 & \$ 4.30 & 77 &\_\_\_\_\_\_\_\_ \\
65 & \$ 4.60 & 79 &\_\_\_\_\_\_\_\_ \\
60 & \$ 4.90 & 81 &\_\_\_\_\_\_\_\_ \\
\hline
\end{array}
$$
a. What is the equilibrium price? What is the equilibrium quantity? Fill in the surplusshortage column and use it to explain why your answers are correct.
b. Graph the demand for wheat and the supply of wheat. Be sure to label the axes of your graph correctly. Label equilibrium price $P$ and equilibrium quantity $Q$.
c. Why will $$\$ 3.40$$ not be the equilibrium price in this market? Why not $$\$ 4.90$$ ? "Surpluses drive prices up; shortages drive them down." Do you agree?
d. Now suppose that the government establishes a ceiling (legal maximum) price of, say, $$\$ 3.70$$ for wheat. Explain carefully the effects of this ceiling price. Demonstrate your answer graphically. What might prompt government to establish a ceiling price?
a. What is the equilibrium price? What is the equilibrium quantity? Fill in the surplusshortage column and use it to explain why your answers are correct.
b. Graph the demand for wheat and the supply of wheat. Be sure to label the axes of your graph correctly. Label equilibrium price $P$ and equilibrium quantity $Q$.
c. Why will $$\$ 3.40$$ not be the equilibrium price in this market? Why not $$\$ 4.90$$ ? "Surpluses drive prices up; shortages drive them down." Do you agree?
d. Now suppose that the government establishes a ceiling (legal maximum) price of, say, $$\$ 3.70$$ for wheat. Explain carefully the effects of this ceiling price. Demonstrate your answer graphically. What might prompt government to establish a ceiling price?

Oluwadamilola Ameobi

Numerade Educator

09:25

Problem 8

How will each of the following changes in demand and/or supply affect equilibrium price and equilibrium quantity in a competitive market; that is, do price and quantity rise, fall, or remain unchanged, or are the answers indeterminate because they depend on the magnitudes of the shifts? Use supply and demand diagrams to verify your answers.
a. Supply decreases and demand is constant.
b. Demand decreases and supply is constant.
c. Supply increases and demand is constant.
d. Demand increases and supply increases.
e. Demand increases and supply is constant.
f. Supply increases and demand decreases.
g. Demand increases and supply decreases.
h. Demand decreases and supply decreases.

Ansh Varma

Numerade Educator

Problem 9

"Prices are the automatic regulator that tends to keep production and consumption in line with each other." Explain.

Check back soon!

View

Problem 10

Explain: "Even though parking meters may yield little or no revenue, they should nevertheless be retained because of the rationing function they perform."

Rashmi Sinha

Numerade Educator

03:28

Problem 11

Critically evaluate: "In comparing the two equilibrium positions in Figure 3-6a, I note that a larger amount is actually purchased at a higher price. This refutes the law of demand."

Oluwadamilola Ameobi

Numerade Educator

Problem 12

Suppose you go to a recycling centre and are paid $$\$.25$$ per kilogram for your aluminum cans. However, the recycling firm charges you $$\$ .20$$ per bundle to accept your old newspapers. Use demand and supply diagrams to portray both markets. Explain how different government policies with respect to the recycling of aluminum and paper might account for these different market outcomes.

Check back soon!

06:42

Problem 13

Advanced analysis: Assume that demand for a commodity is represented by the equation $P=10-.2 Q_{\mathrm{d}}$ and supply by the equation $P=$ $2+.2 Q_{\mathrm{s}}$, where $Q_{\mathrm{d}}$ and $Q_{\mathrm{s}}$ are quantity demanded and quantity supplied, respectively, and $P$ is price. Using the equilibrium condition $Q_{\mathrm{s}}=Q_{\mathrm{d}}$, solve the equations to determine equilibrium price. Now determine equilibrium quantity. Graph the two equations to substantiate your answers.

Ansh Varma

Numerade Educator

Problem 14

Discuss the economic aspects of ticket scalping, specifying gainers and losers.

Check back soon!