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Econ 170 Chapter 3 questions and answers.
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Econ 170 Chapter 3 questions and answers.
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Econ 170 Chapter 3questions and answers
True or false? Price ceilings are typically enacted in an attempt to keep
prices high for those who produce the product. - answer False
Price ceilings are typically enacted in an attempt to keep prices low for
those who demand the product. A price floor is enacted to keep prices
high for producers.
The table below represents the market for livestock. Suppose there is a
price floor set at $500 for a cow. Calculate the surplus caused by the price
floor. - answer A price floor keeps the price for a good from falling below a
set minimum. An effective price floor is set above equilibrium price. To
calculate the surplus caused by the price floor, subtract the quantity
demanded from the quantity supplied. In this case, the surplus is equal to
1,200−1,200, or 0 cows. Because this price floor was set at equilibrium
price, there is no surplus or shortage.
The graph below represents the fertilizer market. Calculate the surplus
caused by the price floor. - answer A price floor keeps the price for a good
from falling below a set minimum. An effective price floor is set above the
equilibrium price. To calculate the surplus caused by the price floor,
subtract the quantity demanded from the quantity supplied. In this case,
the surplus is equal to 480−114, or 366 truckloads of fertilizer.
Which of the following would be consequences of more rental properties in
the United States being subject to binding price ceilings?
Select the two correct answers below. - answer -a shortage of apartments
-the quantity demanded of apartments will exceed the quantity supplied
When a binding rent ceiling is instituted, this causes the price in the
market for apartments to be below equilibrium. As a result, there will be
more people looking for apartments than there will be landlords looking to
rent out apartments. A shortage of apartments will result.
Which of the following is not a factor that could cause a shift in the
demand curve for a certain good?
, Note: consider the difference between demand and quantity demanded. -
answer a change in the price of a good
A change in the price of a good does not change demand for it. A price
increase will change the quantity demanded but not shift the demand
curve. If the price of a good increases, fewer people will want to purchase
it, as explained by a downward sloping demand curve.
A main component used in the production of acoustic guitars has risen in
price by 11%. Demonstrate the effect this has on the equilibrium price and
quantity of acoustic guitars. - answer Step 1: Draw the initial supply and
demand curves with the initial equilibrium price and quantity.
Step 2: Is the supply or demand affected? The increase in price will
decrease supply because of increased production costs.
Step 3: The supply of acoustic guitars will decrease, shifting the supply
curve to the left.
Step 4: A leftward shift in supply causes a movement up the demand
curve, increasing the equilibrium price and decreasing the equilibrium
quantity.
All of these scenarios cause the Demand Curve for a product to shift (left
or right), except for one. Identify that one scenario that does not shift the
Demand Curve. - answer price of the good changes
When the price of a good changes, it is a movement along the demand
curve, not a shift in the demand curve. The new equilibrium point along
the demand curve will indicate both the new quantity demanded and the
new price.
The Millennial generation sees a 10% wage decrease compared to the
previous generation. How does this impact the demand for apartments as
opposed to houses? - answer Step 1: Draw the initial supply and demand
curves with the initial equilibrium price and quantity.
Step 2: Is the supply or demand affected? Apartments are an inferior
good, so when income decreases, demand for apartments instead of
houses increases.
Step 3: The demand for apartments will increase or shift right.
Step 4: A rightward shift in demand causes a movement up the supply
curve, increasing the equilibrium price and the equilibrium quantity.
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