Gm545 Quiz 1
GM545_QUIZ_1 1. | Question : | (TCO A) There is a decrease in the cost of labor for producing bicycles.
(4 pts.) What happens to bicycle supply?
(6 pts.) What happens to bicycle demand? | | | Student Answer: | | Nothing happens to supply, but demand will increase becasuse there will be an decrease in the price of the bicycles. | | Instructor Explanation: | Since a change in costs to produce the product is a supply factor, a decrease in costs would be expected to increase bicycle supply. Remember that supply is a schedule of how many units suppliers are willing to offer at different prices. When costs fall, the supply curve increases or shifts to the right. Since changes in producer costs is not a demand factor, there would be no impact on demand 2. | Question : | (TCO A) Peanut butter and jelly are complements in consumption. The price of jelly falls.
(4 pts.) What happens to the demand for peanut butter?
(6 pts.) What happens to the demand for jelly? | | | Student Answer: | | The demand for peanut butter increases because the price of jelly will bring down the price of peanut butter as it complement, but supply stays the same. | | Instructor Explanation: | When the price of a complimentary good falls, the demand for the other good rises. Price of jelly falls -- demand for peanut butter rises.
This tests your ability to distinguish between a change in demand and a change in quantity demanded. When the price of jelly falls THERE IS NO EFFECT ON THE DEMAND for jelly. Only the quantity demanded would change -- rise in this case. Remember that a change in demand means that THE WHOLE CURVE SHIFTS. | | | | Points Received: | 10 of 10 | | Comments: | | | | 3. | Question : | (TCO A) The number of new home sellers in a given market decreases.
(4 pts.) What happens to the supply of new homes?
(6 pts.) What happens to the demand for new homes? | | | Student Answer: | | The supply decreases because of the
(4 pts.) What happens to bicycle supply?
(6 pts.) What happens to bicycle demand? | | | Student Answer: | | Nothing happens to supply, but demand will increase becasuse there will be an decrease in the price of the bicycles. | | Instructor Explanation: | Since a change in costs to produce the product is a supply factor, a decrease in costs would be expected to increase bicycle supply. Remember that supply is a schedule of how many units suppliers are willing to offer at different prices. When costs fall, the supply curve increases or shifts to the right. Since changes in producer costs is not a demand factor, there would be no impact on demand 2. | Question : | (TCO A) Peanut butter and jelly are complements in consumption. The price of jelly falls.
(4 pts.) What happens to the demand for peanut butter?
(6 pts.) What happens to the demand for jelly? | | | Student Answer: | | The demand for peanut butter increases because the price of jelly will bring down the price of peanut butter as it complement, but supply stays the same. | | Instructor Explanation: | When the price of a complimentary good falls, the demand for the other good rises. Price of jelly falls -- demand for peanut butter rises.
This tests your ability to distinguish between a change in demand and a change in quantity demanded. When the price of jelly falls THERE IS NO EFFECT ON THE DEMAND for jelly. Only the quantity demanded would change -- rise in this case. Remember that a change in demand means that THE WHOLE CURVE SHIFTS. | | | | Points Received: | 10 of 10 | | Comments: | | | | 3. | Question : | (TCO A) The number of new home sellers in a given market decreases.
(4 pts.) What happens to the supply of new homes?
(6 pts.) What happens to the demand for new homes? | | | Student Answer: | | The supply decreases because of the