“If demand is the mother of supply, why are there so many undemanded goods and services supplied in the economy?”
The Main Concepts of : Law of Demand | Law of Supply | Market Clearing Price | Market Equilibrium | Non-Price Rationing | Price Floors and Ceilings | Quantity Demanded | Quantity Supplied | Relative Price | Shortage | Surplus |
Is the quantity demanded different from the quantity bought?
- Yes. For example, at a price of $1,000 per home, the quantity demanded would likely be very high, but the amount people would sell at this price would be zero. So the quantity demanded will not equal the quantity actually bought, except in equilibrium.
Is the quantity supplied different from the quantity sold?
- Yes.
What is the difference between scarcity and shortage?
- Scarcity is when there are not enough units of a good to satisfy all of everyone’s wants when the price of the good is zero. A shortage is when there are not enough units sold at a given price to satisfy what people want to buy at that price.
Can there be a surplus of a scarce good?
- Yes; just impose a price floor above the equilibrium price.
How can a merchant tell whether his or her price is too low? Too high?
- If the price is too low; there is excess demand for the merchant’s goods. If it is too high, there is excess supply.
Does demand change when the price changes?
- No. The quantity demanded changes when the price changes.
When there is a shortage, how will the price change? What will happen to the quantity demanded and supplied?
- The price will rise; the quantity demanded will decrease while the quantity supplied will increase.
Why does an individual usually buy more of a good when its price falls?
- Income effect and substitution effect
Is a market in equilibrium when the amount bought equals the amount sold?
- No. The market is in equilibrium only when the quantity demanded equals the quantity supplied.
If the price of TVs stays at $200 while inflation continues, what will happen to the demand for TVs according to the law of demand?
- The relative price of TVs will fall, so the quantity demanded will increase.
Is the following statement correct? “Home prices are so high there is a shortage of homes. Not everyone who wants a home will be able to buy one.”
- The statement is incorrect. At the equilibrium price, there will be no shortages, since all buyers who want homes at prevailing prices will get them. If there were a shortage of homes, the price would rise until the housing market reached equilibrium.
Suppose a rent control law forces rents below the market level of rents. How might owners of apartment buildings offset the effects of rent control laws on their profits?
- Rent controls create a shortage of apartments, so owners can cut back on maintenance and service without losing renters. Apartment owners also may seek ways to charge renters for “extra” services, even if these ways are illegal. For example, some apartment owners have allegedly used these methods to reduce the adverse impact of rent controls: (1) “key money” for the key to the apartment. (2) kickbacks from rental brokers who get paid to find apartment for their clients, and (3) lower pay to the apartment’s superintendent, who then collects “tips” from renters.
Over a two-year period, the price of TVs went up 5% and the price of all other goods went up 12%. During the same period, more TVs were sold. Does this support or contradict the law of demand?
- The relative price of TVs went down over the two-year period (by 7%) and more TVs were demanded. So this supports the law of demand.
If each person demands one movie a month when one movie ticket costs $6, two movies a month when each costs $4, and three when each costs $2, what will the total demand be for 100 people for each price?
- The market demand is the sum of the individual’s demand at each price. At $6 per movie ticket, 100 tickets will be sold. At $4, 200 tickets, and a $2, 300 tickets.
- A minimum wage prevents employers from offering lower wages in exchange for training and good working conditions. As a consequence, employers faced with a minimum wage that is above what they’d otherwise pay will cut back on training (by hiring only experienced workers) and be less concerned with working conditions. One study found that minimum wages actually caused many workers to lose more, in training and working conditions, than they gained from higher wages.
Use the law of demand and the concept of relative price to explain why a higher percentage of the oranges sold in
- The cost of transporting and selling oranges in NYC does not depend on their quality. Therefore, the relative price of high-quality oranges is less in NYC, so the law of demand predicts relatively more high-quality oranges will be demanded in NYC. For example, suppose a carton of low-quality oranges costs $10 in
Suppose that employers dislike hiring dark-haired workers and suffer a loss in their personal satisfaction equivalent to $1 an hour for each hour they employ a dark-haired worker. How could a dark-haired worker then get a job with an employer? In this case, what would be the effect of a minimum wage law that pushed dark-haired workers wages up by $1?
- Dark-haired workers can get a job with employers if they work for $1 less per hour than do other workers. This will compensate the employers for their dislike of dark-haired workers. A minimum wage that prevents dark-haired workers from accepting lower wages in order to get work will reduce their employment.
When Peter earned $10, he bought four hamburgers at $2 each and two sodas at $1. In the following month, he earned $20, but the price of hamburgers had risen to $3 and the price of sodas had risen to $4. So if Peter wanted to, he could still buy four hamburgers and two sodas. Will he?
- The relative price of sodas has gone up from one-half ($1/$2) to four-thirds ($4/$3) of a hamburger. The substitution effect predicts that Peter will substitute “away” from sodas “toward” hamburgers.
http://become-debt-free.blogspot.com
http://humorandwit.blogspot.com
No comments:
Post a Comment