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Lecture 3
Lecture 3
Lecture 3
Lecture 4
Lecture 4
100
What determines almost all prices and wages in our economy?
Supply and Demand
100
Define Law of Supply
In order to profitably produce more, a producer needs a higher price to cover increasing Marginal Costs.
100
Are all really scarce products expensive?
Usually (ex. diamonds)
100
Temporary surpluses or shortages happen all the time, what gets rid of them?
A price increase, QD down then QS goes up. ex. gas prices
100
Farm price and minimum wage laws are examples of a price ceiling or floor?
Floor
200
What happens to Marginal Utility (MU) per dollar when a price drops?
It goes up. Good become more attractive so consumers buy more.
200
As a price falls to equilibrium, what does Quantity Demanded do? Quantity Supplied?
QD goes up, QS goes down
200
In addition to scarcity, what makes a price high?
High Marginal Utility, which therefore creates high demand
200
What is a prolonged shortage a sign of?
A price ceiling (ex. rent controls)
200
Why and how does a Black Market arise?
Buyers want the product at a price above the ceiling.
300
How does MU/$ increasing explain the Law of Demand?
As price falls, quantity demanded goes up!
300
When QD > QS, which way do sellers move the price?
Sellers increase the price
300
Is chewing gum scarce? Is there a shortage? Why or why not?
Yes, it is scarce. No, there is no shortage. Because the price is at equilibruim.
300
What is a prolonged surplus a sign of?
A price floor (ex. minimum wage)
300
Do ceilings really help poor people?
Not if they cannot get the product at all.
400
What do demand curves always look like?
They slope down to the right
400
What gov. agency tells sellers to move the price when QD > QS?
None
400
Is gold scarce? Is there a shortage? Why or why not?
Same answers as the chewing gum question.
400
Who creates the floors and ceilings?
Government rules and social pressures
400
What do these items do to affect a coffee shops demand? A. lattes shown to lengthen life B. recession hits economy C. price of soda goes up D. prices of danishes and croissants go up
A. up, tastes and preferences. B. down, income C. up, substitutes price up D. down, complimentary goods are more expensive
500
As output (Total Product) rises, what happens to Marginal Product? Marginal Cost?
Marginal Product goes down, Marginal Cost goes up
500
When QD< QS, which way do sellers move the price and how far?
The price is moved down until QD = QS
500
How can all shortages be eliminated?
By allowing the price to go to EQUILIBRIUM, because at EQ, everyone who wants to buy a product can buy it if the are willing to pay the price.
500
To have any effect, a price floor must be above or below EQ? What will result?
Above, a surplus
500
What do these things do to the supply of coffee shops? A. coffee bean prices down B. barista wage increase C. more shops enter the market D. EPA outlaws java fumes E. more efficient coffee brewer invented
A. up, costs are down B. down, costs are up C. up, more suppliers D. down, costs are up E. up