Supply and Demand and Demand Curve

Topics: Supply and demand, Demand curve, Inverse demand function Pages: 5 (1347 words) Published: May 1, 2014
1.Suppose there are 100 consumers with identical individual demand curves. When the price of a movie ticket is $8, the quantity demanded for each person is 5. When the price is $4, the quantity demanded for each person is 9. Assuming the law of demand holds, which of the following choices is the most likely quantity demanded in the market when the price is $6? Explain and show calculations,

While the question asks of the choices given what the quantity demanded will be, there are no choices given. Based on the ratio between the numbers previously given in the answer the quantity demanded is most likely 7. This is because it is the median number between 5 and 9 when the price is the median number between 4 and 8. Ergo the quantity demanded for tickets is 7 at the price of $6. $45 tickets

$6
7 tickets
$89 tickets

2.When economists say the quantity demanded of a product has increased, they mean the:

The quantity demanded is the amount of a product people are willing to buy at a certain price. The quantity supplied refers to the amount of a certain good producers are willing to supply when receiving a certain price. If the quantity demanded has increased it means two things have occurred. First, the price has decreased, causing a higher demand for the product. Second, there is a large enough supply to keep the supplier and consumer happy.

3.Suppose all of the major computer manufacturers announced that beginning next month there would be major price reductions on their computers. This would cause the current demand for computers to:

A reduction in price for computers, which are a high demand item, would cause demand to increase as well. When people get a reduction on a good that they want they are more likely to buy it. When it is on technology the demand is increased due to the fact that we live in a technological society. While it is unlikely that all major computer manufacturers would jointly lower their prices it is a nice thought.

4.Three of the four events described below might reasonably be expected to shift the demand curve for beef to a new position. One would not shift that demand curve. The single exception is a(n); EXPLAIN your answer.

a.achange in people's tastes for beef.
b.increase in the money incomes of beef consumers.
c.fall in the price of beef.
d.change in the price of a product competitive with beef (e.g. pork).

I chose C for several reasons. The shift of a demand curve takes place when a non-price determinant factor changes. A change in peoples taste for beef will shift a demand curve because as people dislike beef the demand will go down. Also, as disposable income increases the demand curve may go up or down depending on the level of income it is increased to. A change in the price of a rival product would also either rise or lower demand for beef. A fall in the price of beef is a price determinant and thus is not a factor that would shift the demand curve.

5. Three of the four events described below might reasonably be expected to shift the demand curve for Tacos to a new position. One would not shift the demand curve. The single exception is; EXPLAIN your answer.: a. a change in people's tastes with respect to Tacos.

b.an increase in the money income of beef consumers.
c.a widespread advertising campaign undertaken by the producers of a product competitive with Tacos. d.a fall in the price of Tacos

I chose D for several reasons. As stated above, the shift of a demand curve occurs when a non-price determinant factor changes. Whether you like tacos or not change the price of them. Also, an increase in your disposable income does not change the price of tacos, only how much money you have to spend on them. An advertising campaign of a competitor, also, does not change the price of tacos. All of these factors could shift the demand curve of tacos while a fall in the price of tacos would not shift the demand curve.

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