VIEWS: 11 PAGES: 2 POSTED ON: 11/30/2011
Note Sheet – SUPPLY [assume perfectly competitive markets] 41. Supply – quantities producers offer at each (technique/price). 42. The relationship between price and QS is (direct/inverse) and the relationship between price and QD is (direct/inverse) or opposite. 43. The “law of supply” indicates that producers will offer (less/more) at higher prices. 44. In moving along a stable supply or demand curve, (income/price) is not held constant. Supply Schedule for Baseball Caps Price Caps “Change in QS” Per Cap Supplied $30 $30 500 1. Price change $25 460 25 Particular price 20 2. Movement $20 350 $15 150 15 3. Point on the curve $10 0 Direct 10 0 100 200 300 400 500 45. (Inelastic/Elastic) supply – supply that is very responsive to price. 46. (Inelastic/Elastic) supply – when a change in price has little impact on QS. 47. The three-item test for elastic supply is: the item can be made quickly, it tends to be cheap, and it can be produced by (skilled/unskilled) workers. 48. The three-item test for inelastic supply is: the item cannot be made quickly, it tends to be expensive, and (skilled/unskilled) workers are needed to produce it. 49. An example of inelastic supply is (posters/computers/T-shirts). 50. An example of elastic supply is (HDTV/computers/T-shirts). 51. The supply curve for elastic supply is more (flat/vertical). 52. The supply curve for inelastic supply is more flat/vertical). 53. A reduction in the price of cattle feed will cause the (demand/supply) curve for beef to shift. Six Nonprice Determinants of Supply (“Supply Shifters”) “Change in S” RATNEST Suppliers supply sm./larger quantities at each price Non-price; shift; whole curve “R” – resource cost[wages/raw materials][inverse] S3 S1 S2 ($) “A” – alternative output price changes[inverse] “T” – technology [direct] P1 Corn Wheat P “Shifts” “N” – number of suppliers[direct] P2 P ($) ”E” – expectations about future price [inverse] “S” – subsidies[direct](free money from the G) “T” – Taxes [inverse] QS3 QS1 QS2 All Prices 54. The “invisible hand” milking machine[technology] would move the supply curve (right/left). 55. Dell Computer has its taxes increased which moves its supply curve to the (left/right). 56. Firms[suppliers] entering an industry will cause the supply curve to shift to the (left/right). 57. A decline in the price of corn[alt. output] would cause a farmer to offer (more/less) wheat. 58. An increase in wages cause the supply curve for widgets to shift(left/right). 59. If oil producers expect future oil prices to decline, they will (increase/decrease) current production. 60. A new professional football league will (increase/decrease) the supply of football games. 61. Equilibrium price will be ($1/$2/$3). Bushels Demanded Corn Price Bushels supplied 62. If the price in this market were $2, farmers 26 $5 46 be able to sell all their corn. (would/would not) 32 $4 41 63. If the price were initially $5, we would 37 $3 37 expect the price of corn supplied to 43 $2 32 (incr/decr) as a result of the price change. 48 $1 29 64. A price of $36 will result in a (shortage/surplus) of (50/100). 65. If this is a competitive market, price & quantity will gravitate toward ($12 & 150/$24/ & 100). 66. The highest price that buyers will be willing and able to pay for 50 units of this product is ($12/$24/$36). 67. A price of $12 will result in a (surplus/shortage) of (50/100). Incr. in “D” Incr. in “S” & & Decr. in “D” Decr. in “S” 68. Increase in the price of irrigation equipment[resource cost] upon the market for wheat is illustrated by diagram (A/B/C/D). 69. Increase in incomes upon the market for spam is illustrated by diagram (A/B/C/D). 70. Subsidy for cancer research being taken away is illustrated by diagram (A/B/C/D). 71. Decrease in the price of Coors upon the market for Budweiser is illustrated by diagram (A/B/C/D). 72. Decrease in worker wages on the market for textiles is illustrated by diagram (A/B/C/D). 73. Increase in the price of cameras upon the market for film is illustrated by diagram (A/B/C/D). 74. A decrease in income, if “X” is an inferior good would (increase/decrease) (demand/supply), (increase/decrease) price, and (increase/decrease) quantity. 75. A decrease in the number of consumers for product “X” will (increase/decrease) (demand/supply), (increase/decrease) price, and (increase/decrease) quantity. 76. Producer expectations that the price of “X” will decrease sharply in the future will (increase/decrease) (demand/supply), (increase/decrease) price, & (incr/decr) quantity. 77. A decrease in the price of a product which is a substitute to “X” will (increase/decrease) (supply/demand), (increase/decrease) price, (increase/decrease) quantity. 78. [Draw on Graph E above] If demand increases & supply decreases, equilibrium price will (increase/decrease/stay the same) & equilibrium quantity will (increase/decrease/stay the same). 79. [Draw on Graph F above] If demand decreases & supply increases, equilibrium price will (increase/decrease/stay same) & equilibrium quantity will (increase/decrease/stay same). 80. [Draw on Graph G above] If the supply & demand curves both increase, equilibrium price will (increase/decrease/stay same) & equilibrium quantity will (increase/decrease/stay same). 81. [Draw on Graph H above] If demand & supply curves both decrease, equilibrium price will (increase/decrease/stay same) & equilibrium quantity will (increase/decrease/stay same).
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