QUESTION 1 Section I: Supply & Demand Analysis (Chapter 3) In each of the follow
ID: 1140224 • Letter: Q
Question
QUESTION 1
Section I: Supply & Demand Analysis (Chapter 3)
In each of the following 10 questions, show what happens to the Demand, Supply, equilibrium price and equilibrium quantity of copper. Show an increase by use of +, a decrease with a -, and no change with 0 (that’s a zero, not an O or o). Although in the real world, both supply and demand are constantly changing, in the model we are using here, only one curve shifts per problem. So, if demand goes + or -, supply will be 0, and vice versa. In no case will equilibrium price or equilibrium quantity be 0. You may want to sketch out the supply and demand curve analysis to help in answering the questions.
You will also be required to identify which determinant (of demand or supply) has changed, thus causing the shift. Rather than actually writing in the determinant, fill in the blank with the number that corresponds to the relevant determinant, based upon the following list. You may want to refer to the lecture notes entitled Determinants of Demand & Supply in the COURSE CONTENTS section. For questions 1 - 10, refer back to this list. Some you may want to use more than once, some you won't use at all. Copy and paste this list to an MS Word document and then print it out if you don't want to keep scrolling back and forth between this list and the question you're trying to answer.
Determinants of Demand:
1. Change in buyer tastes
2. Change in number of buyers
3. Change in income
4. Change in the prices of related goods (on the demand side)
5. Change in consumer expectations
Determinants of Supply:
6. Change in resource prices
7. Change in technology
8. Changes in taxes and subsidies
9. Change in prices of related goods (on the supply side)
10. Change in producer expectations
11. Change in the number of suppliers.
For example, if a rightward shift in the supply curve for an item were caused by an increase in the number of producers of that item, you would indicate this be entering 11into the relevant blank. If the demand curve shifted to the left because people didn't like that item anymore (like mimeograph machines), you'd enter 1 into the blank.
In questions 1 - 10, you will be analyzing the copper market. Each of these 10 questions will deal with the supply and demand of copper. Remember, the consumers of copper are usually builders and construction firms. Only one curve shifts per problem. Ready? Ok, so here's the first one -- What would happen in the copper market if:
Governments around the world increase business taxes on the mining of copper.
Demand ______________
Supply: ______________
Equilibrium price: ______________
Equilibrium quantity exchanged ______________
Which determinant changed? (enter a number, 1 through 11) ______________
QUESTION 2
A recession in the United States and other capitalist societies causes the construction industry to slow dramatically. Remember that in this, and the other questions through #10, you are doing the supply and demand analysis for the COPPER mining industry.
Demand: ______________
Supply: ______________
Equilibrium Price: ______________
Equilibrium Quantity Exchanged ______________
Which determinant changed? ______________
QUESTION 3
Builders and construction firms expect that the price of copper will rise dramatically in the near future.
Demand; ______________
Supply: ______________
Equilibrium Price: ______________
Equilibrium Quantity Exchanged ______________
Which determinant changed? ______________
QUESTION 4
Technology has made it possible for electrical current to be conducted efficiently with a very low priced substance such as dental floss (remember, you're analyzing the copper market).
Demand; ______________
Supply: ______________
Equilibrium Price: ______________
Equilibrium Quantity Exchanged: ______________
Which determinant changed? ______________
QUESTION 5
Miners around the world go on strike to protest the presidency of Donald Trump.
Demand; ______________
Supply: ______________
Equilibrium Price: ______________
Equilibrium Quantity Exchanged; ______________
Which determinant changed? ______________
QUESTION 6
President Trump signs into law a bill that says the U.S. government will subsidize the construction of new homes, office buildings, bridges, and other infrastructure projects requiring copper.
Demand; ______________
Supply: ______________
Equilibrium Price: ______________
Equilibrium Quantity Exchanged; ______________
Which determinant changed? ______________
QUESTION 7
A huge vein of copper, the size of Minnesota, has been discovered in …., of all places,…… Minnesota.
Demand; ______________
Supply: ______________
Equilibrium Price: ______________
Equilibrium Quantity Exchanged; ______________
Which determinant has changed? ______________
QUESTION 8
High society decides that gold has become crass, and now prefers jewelry made of copper because they like the way it turns green.
Demand; ______________
Supply: ______________
Equilibrium Price: ______________
Equilibrium Quantity Exchanged; ______________
Which determinant changed? ______________
QUESTION 9
A technological innovation has made it easier to discover veins of copper and cheaper to extract it from the earth.
Demand; ______________
Supply: ______________
Equilibrium Price: ______________
Equilibrium Quantity Exchanged: ______________
Which determinant changed? ______________
QUESTION 10
Non-capitalist economies around the world begin a phase of rapid economic development, construction and growth, becoming increasingly wealthy, as they begin to adopt more capitalist institutions, as in China, Russia, and the former communist countries of East Europe.
Demand; ______________
Supply: ______________
Equilibrium Price: ______________
Equilibrium Quantity Exchanged: ______________
Which determinant changed? ______________
QUESTION 11
Which of the following statements is false?
There is a direct (positive) relationship between price and quantity supplied.
A change in the supply of an item will cause a change in its price, but a change in the price of an item will not cause a change in its supply.
When the price of an item goes down, ceteris paribus, the quantity supplied will go down, but the supply will not change.
When the supply curve for an item shifts to the right, ceteris paribus, it will cause the price of that item to go up.
QUESTION 12
Which of the following does not explain why is there an inverse (negative) relationship between price and quantity demanded?
Diminishing marginal utility -- as you consumer more, as the result of a price decrease, the additional satisfaction received from the additional units consumed will start to go down.
Income effect -- that is, a price change can affect the amount of some item you can afford to purchase.
Substitution effect -- that is, a price change can affect the opportunity cost of purchasing some item and your willingness to switch to (or from) another item.
When the price of an item increases, you buy more because it is more valuable.
QUESTION 13
Which of the following statements is true?
A price floor set below the equilibrium price in a particular market will cause a shortage.
A price ceiling set above the equilibrium price, in a particular market, will cause a surplus.
A price floor set above the equilibrium price, in a particular market, will have no effect on that market.
A price ceiling set below the equilibrium price in a particular market will cause a shortage.
QUESTION 14
Which of the following is true?
Rent control is an example of a price floor.
A price ceiling on some item, set below its equilibrium price, creates rationing problems.
A price floor for a resource, such as the minimum wage, set above its equilibrium price, would increase the demand for that resource.
A price ceiling on gasoline, set below its current equilibrium price, would assure that everyone would be able to buy gasoline at an affordable price.
QUESTION 15
Which of the following is not a determinant of demand?
Changes in the price of a substitute or complement
Household’s income and wealth.
The price of the item
Consumers’ expectations about their income, wealth and/or the price of the item
QUESTION 16
In the resource market, as shown in this circular flow diagram found on page 43 of the textbook, the household does the supplying and the firm does the demanding.
--- True
--- False
A.There is a direct (positive) relationship between price and quantity supplied.
B.A change in the supply of an item will cause a change in its price, but a change in the price of an item will not cause a change in its supply.
C.When the price of an item goes down, ceteris paribus, the quantity supplied will go down, but the supply will not change.
D.When the supply curve for an item shifts to the right, ceteris paribus, it will cause the price of that item to go up.
Explanation / Answer
Governments around the world increase business taxes on the mining of copper.
Demand _____would fall- leftward shift________
Supply: ____might fall too__________
Equilibrium price: ______increase________
Equilibrium quantity exchanged ____lower__________
Which determinant changed? (enter a number, 1 through 11) ______________
QUESTION 2
A recession in the United States and other capitalist societies causes the construction industry to slow dramatically. Remember that in this, and the other questions through #10, you are doing the supply and demand analysis for the COPPER mining industry.
Demand: ____less__________
Supply: _____less_________
Equilibrium Price: ______fall________
Equilibrium Quantity Exchanged ________less______
Which determinant changed? ______demand would fall________
QUESTION 3
Builders and construction firms expect that the price of copper will rise dramatically in the near future.
Demand; _____fall in the present_________
Supply: ______same________
Equilibrium Price: ____lower__________
Equilibrium Quantity Exchanged ______fall________
Which determinant changed? _____demad would fall_________
QUESTION 4
Technology has made it possible for electrical current to be conducted efficiently with a very low priced substance such as dental floss (remember, you're analyzing the copper market).
Demand; ___rise___________
Supply: ____short run the same, long run can increase__________
Equilibrium Price: _____high_________
Equilibrium Quantity Exchanged: _____high_________
Which determinant changed? ________demand rise______
QUESTION 5
Miners around the world go on strike to protest the presidency of Donald Trump.
Demand; _______more_______
Supply: _____less_________
Equilibrium Price: _____rise_________
Equilibrium Quantity Exchanged; ______more________
Which determinant changed? ________supply fall______
QUESTION 6
President Trump signs into law a bill that says the U.S. government will subsidize the construction of new homes, office buildings, bridges, and other infrastructure projects requiring copper.
Demand; _____same_________
Supply: ______rise________
Equilibrium Price: ______fall________
Equilibrium Quantity Exchanged; _______high_______
Which determinant changed? ____supply increased__________
QUESTION 7
A huge vein of copper, the size of Minnesota, has been discovered in …., of all places,…… Minnesota.
Demand; ____reduce__________
Supply: ______same________
Equilibrium Price: ______high________
Equilibrium Quantity Exchanged; ________less______
Which determinant has changed? ____demand fall__________
QUESTION 8
High society decides that gold has become crass, and now prefers jewelry made of copper because they like the way it turns green.
Demand; _____rise_________
Supply: ____short run the smae, long run can increase__________
Equilibrium Price: _____high_________
Equilibrium Quantity Exchanged; _______high_______
Which determinant changed? ______demand increased________
QUESTION 9
A technological innovation has made it easier to discover veins of copper and cheaper to extract it from the earth.
Demand; _____same_________
Supply: ___________incresead___
Equilibrium Price: _________fall_____
Equilibrium Quantity Exchanged: _____more_________
Which determinant changed? _____supply increased_________
QUESTION 10
Non-capitalist economies around the world begin a phase of rapid economic development, construction and growth, becoming increasingly wealthy, as they begin to adopt more capitalist institutions, as in China, Russia, and the former communist countries of East Europe.
Demand; _____more-- increased_________
Supply: ______increase________
Equilibrium Price: ____high__________
Equilibrium Quantity Exchanged: ______high________
Which determinant changed? ______demand increased rapidly________
ques 11: d)
ques 12:d)
ques 13:d)
ques14:a)
ques 15:c)
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