chapter: 3 ©2009 worth publishers supply and demand check your understanding >> krugman/wells

chapter:

3

©2009 Worth Publishers

Supply and Demand

CHECK YOUR UNDERSTANDING

>>

Krugman/Wells

Check Your Understanding 3-1Question 1

Explain whether each of the following events represents (i) a shift of the demand curve or (ii) a movement long the demand curve.

1a) A store owner finds that customers are willing to pay more for umbrellas on rainy days.

1. This represents a shift of the demand curve.

2. This represents a movement along the demand curve.

1b) When XYZ Telecom, a long distance provider, offered reduced rated on weekends, the volume of weekend calling increased sharply.



1c) People buy more long-stem roses the week of Valentine’s Day, even though the prices are higher than at other times during the year.



1d) The sharp rise in the price of gasoline leads many commuters to join carpools in order to reduce their gasoline purchases.



1a) More homeowners put their houses up for sale during a real estate boom that causes prices to rise.

1. This represents a shift of the supply curve.

2. This represents a movement along the supply curve.

1b) Many strawberry farmers open temporary roadside stands during harvest season, even though prices are usually low at that time.



1c) Immediately after the school year begins, fast-food chains must raise wages to attract workers.



1d) Many construction workers temporarily move to areas that have suffered hurricane damage, lured by higher wages offered.



1e) Since new technologies have made it possible to build larger ships (which are cheaper to run per passenger), Caribbean cruise lines have offered more berths, at lower prices, than before.



NEW CHECK YOUR UNDERSTANDING

Check Your Understanding 3-3Question 1*

Given the demand andsupply of pounds of coffee, answer the following questions.

PriceQuantity

DemandedQuantity

Supplied

$5 200 500

$4 400 400

$3 600 300

$2 800 200

$1 1000 100


1a*) The equilibrium price is $_____, and the equilibrium quantity is _____ pounds.

1. $5; 5002. $4; 400 3. $3; 300 4. $2; 800

PriceQuantity

DemandedQuantity

Supplied

$5 200 500

$4 400 400

$3 600 300

$2 800 200

$1 1000 100


1b*) At a price of $5, there is a ______ of ______ pounds.

1. surplus; 1002. surplus; 300 3. shortage; 400 4. shortage; 600

PriceQuantity

DemandedQuantity

Supplied

$5 200 500

$4 400 400

$3 600 300

$2 800 200

$1 1000 100


1c*) At a price of $2, there is a ______ of ______ pounds.

1. surplus; 1002. surplus; 300 3. shortage; 400 4. shortage; 600

PriceQuantity

DemandedQuantity

Supplied

$5 200 500

$4 400 400

$3 600 300

$2 800 200

$1 1000 100


In the following three situations, the market is initially in equilibrium.

1a) 1997 was a very good year for California wine-grape growers, who produced a bumper-sized crop. This causes:

1. a shortage of grapes and prices rise.2. a shortage of grapes and prices fall.3. a surplus of grapes and prices rise.4. a surplus of grapes and prices fall.

1b) After a hurricane, Florida hoteliers often find that people cancel their upcoming vacations, leaving them with empty hotel rooms. This causes:

1. a shortage of hotel rooms and prices rise.

2. a shortage of hotel rooms and prices fall.

3. a surplus of hotel rooms and prices rise.

4. a surplus of hotel rooms and prices fall.

3) After a heavy snowfall, many people want to buy secondhand snow blowers at the local tool shop. This causes:

1. a shortage of secondhand snow blowers and prices rise.

2. a shortage of secondhand snow blowers and prices fall.

3. a surplus of secondhand snow blowers and prices rise.

4. a surplus of secondhand snow blowers and prices fall.


Directions: Read the scenarios and then answer the questions

1ai) As the price of gasoline fell in the United States during the 1990s, more people bought large cars. What is the market in question in this scenario?

1. gasoline

2. cars

1aii) As the price of gasoline fell in the United States during the 1990s, more people bought large cars. Did supply or demand shift, and which way?

1. supply shifted left

2. supply shifted right

3. demand shifted left

4. demand shifted right

1aiii) As the price of gasoline fell in the United States during the 1990s, more people bought large cars. What is the effect on prices and quantity?

1. quantity and price fell

2. quantity and price rose

3. quantity fell and price rose

4. quantity rose and price fell

1bi) As technological innovation has lowered the cost of recycling used paper, fresh paper made from recycled stock is used more frequently. What is the market in question in this scenario?

1. recycled paper

2. fresh paper made from recycled paper

1bii) As technological innovation has lowered the cost of recycling used paper, fresh paper made from recycled stock is used more frequently. Does supply or demand shift, and which way?

1. supply shifts left

2. supply shifts right

3. demand shifts left

4. demand shifts right

1biii) As technological innovation has lowered the cost of recycling used paper, fresh paper made from recycled stock is used more frequently. What is the effect on price and quantity?

1. quantity and price fall2. quantity and price rise3. quantity falls and price rises4. quantity rises and price falls

1ci) As a local cable company offers cheaper pay-per-view films, local movie theaters have more unfilled seats. What is the market in question in this scenario?

1. pay-per-view movies

2. movies at a local movie theater

1cii) As a local cable company offers cheaper pay-per-view films, local movie theaters have more unfilled seats. Does supply or demand shift, and which way?

1. supply shifts left

2. supply shifts right

3. demand shifts left

4. demand shifts right

1ciii) As a local cable company offers cheaper pay-per-view films, local movie theaters have more unfilled seats. What is the effect on prices and quantity?

1. quantity and price fall

2. quantity and price rise

3. quantity falls and price rises

4. quantity rises and price falls


Periodically, a computer chip maker like Intel introduces a new chip that is faster than the previous one. In response, demand for computers using the earlier chip decreases as customers put off purchases in anticipation of machines containing the new chip. Simultaneously, computer makers increase their production of computers containing the earlier chip in order to clear out their stocks of those chips.

2a) What happens to the supply curve for computers using the earlier chip?

1. it shifts left

2. it shift right

2b) What happens to the demand curve for computers using the earlier chip?

1. it shifts left

2. it shifts right

2c) The equilibrium quantity for computers using the earlier chip must fall.

1. True

2. False

2d) The equilibrium price for computers using the earlier chip must fall.

1. True

2. False

chapter: 3 ©2009 worth publishers supply and demand check your understanding >> krugman/wells

Documents

demand curve

supply curve

demand shift

right slide

price quantity

supply of pounds

price of gasoline

lower prices