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    AP Microeconomics

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
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    3 views5 pages

    Activity 9

    Uploaded by

    sriramana1
    AP Microeconomics

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
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    of 5
    LESSON 1 @ ACTIVITY 9 and Curves, Movements Along Demand Curves and ifts in Demand Curves A 9.1 shows the market demand for a hypothetical product: Greebes. Study the data, and plot the for Greebes on the axes in Figure 9.2. Label the demand curve D, and answer the questions that - Write the correct answer in the answer blanks or underline the correct words in parentheses. 91 id for Greebes ‘Quantity Demanded Greebe) (millions of Greebes) 30 100 160 200 250 300 380 400 QUANTITY (millions of Greebes) eta for demand curve D indicate that ata price of $0.30 per Greebe, buyers would be willing to {52 ___ million Greebes. Other things constant, if the price of Greebes increased to $0.40 per - buyers would be willing to buy_5© million Greebes. Such a change would be a in (demand, Other things constant ifthe price of Greebes decreased 25 $0.20, buyers would be willing Bi million Greebes. Such a change would be called Secrease in (demand (quantity demanded). Paap Saunders, Introduction to Microeconomics: Student Workbook, 18th ed. (Bloomington, Ind. 1998). fe Philip Saunders. All rights reserved. Seems Mirosconmi Sten Acts © Nana Gounsilon Economic Edscation, NewYork NX LESSON 1 & ACTIVITY 9 (con Now, let’s suppose there is a dramatic change in federal income-tax rates that affects the dispo income of Greebe buyers. This change in the ceteris paribus (all else being equal) conditions unde ing the orig 9.3, Study the new data, and add the new demand curve for Greebes to the axes in Figure 9.2, Label the new demand curve D, and answer the questions that follow EB sigues3 New Demand for Greebes nal demand for Greebes will result in a new set of data, shown in F. Price Quantity Demanded per Gresbe) _(milions of Greebes) $.05 300 10 250 15 200 20 150 25 400 30 50 Comparing the new demand curve (D,) with the original demand curve (D), we can say that the change in the demand for Greebes results in a shift of the demand curve to the TGh/ right), Such a shift indicates that at each of the possible prices shown, buyers are now willing to buy a Gmaller P¥grger) quantity; and at each of the possible quantities shown, buy . (higher Mower) maximum price-Fhe cause of this demand curve shift was a(n) @icteast tax rates that (increased /( ‘the disposable income of Greebe buyers. Now, let's suppose that there isa dramatic change in people’s tastgs and preferences fos Greebes. 7 change in the ceteris paribus conditions underlying the original demand for Greébés will result in a ma set of data, shown in Figure 9.4, Study these new data, and add the new demand curve for Grecbes the axes in Figure 9.2. Label the new demand curve D, and answer the questions that follow. igure 9.4 New Demand for Greebes Quantity Demanded (millions of Greebes) 350 300 250 200 150 100 50 Comparing the new demand curve (D,) with the original demand curve (D), we can say that the change in the demand for Greebes results in a shift of the demand curve to the (left / igh. LESSON 1 @ ACTIVITY 9 (continues) tha shift indicates that at each of the possible prices shown, buyers are now willing to buy Braller Karger) quantity and at each of the possible quantities shown, buyers are willing to © oer Kh yximum price. The cause of this shift in the demand curve was a(n) reasd)/ decrease) in people's tastes and preferences for Grecbes. tB : to test your understanding, underline the answer you think is the one best alternative in each of following multiple-choice questions. (Other things constant, which of the following would not cause a change in the demand (shift in demand curve) for mopeds? A) A decrease in consumer incomes Ki) A decrease in the price of mopeds ©) An increase in the price of bicycles D) An increase in people's tastes and preferences for mopeds Rising oil prices have caused a sharp decrease in the demand for oil” Speaking precisely, and using ‘ms as they are defined by economists, choose the statement that best describes this quotation. A) The quotation is correct: An increase in price always causes a decrease in demand, B) The quotation is incorrect: An increase in price always causes an increase in demand, not a decrease in demand, The quotation is incorrect: An increase in price causes a decrease in the quantity dem not a decrease in demand. led, 'D) The quotation is incorrect: An increase in price causes an increase in the quantity demanded, not a decrease in demand, As the price of domestic automobiles has inched upward, customers have found foreign autos to ea better bargain, Consequently, domestic auto sales have been decreasing, and foreign auto sales 1e been increasing,” Using only the information in this quotation and assuming everything else Eonstant, which of the following best describes this statement? |.4) A shift in the demand curves for both domestic and foreign automobiles A movement along the demand curves for both foreign and domestic automobiles i movement along the demand curve for domestic autos, and a shift in the demand curve for foreign autos D) A shift in the demand curve for domestic autos, and a movement along the demand curve for foreign autos pecs nomies Mcroscnomic: Stade Actives National Counce Economic Eatin New York 33 ru D LESSON 1 ml ACTIVITY 9 ‘conti ts are like a perpetual see-saw. If demand rises ls, price will fall; if price falls, demas no more than one shor 4, You hear a fellow student say: “Economic market price rises: if price rises, then demand will fall. If demand fal will rise and so on forever” Dispel your friend’s obvious confusion in paragraph below Achonge in damand 3 netacharge, be yusnbly olumandd. fol but Vad o A nal The Gen Quurribhy, dermeaalod aay demand usih0 {4 PartC (Once we have the deman nd curve, we can define the concept of consumer surplus. Consumer su the value received from the purchase of a good in excess of the price paid for it, or stated different the difference between the amount a person is willing and able to pay and the actual price paid for cach unit An approximation of consumer surplus can be shown graphically asthe area below the demas curve above the price paid. Redraw the first demand curve (D) from Figure. 9.2 on Figure 9.5 s established at $0.30, shade the area above $0.30 up to thie If the price for all the quantities sold demand curve. This is the area of consu Continue to use the demand curve from Figure 9.2, and asstime that the price is established at S03 “There are buyers who will benefit because they ae willing and able to pay higher prices than the « lished price ($0.30). For example, 30 million Greebes are demanded at $0.40, but since the mat +s $0.30, there isa gain to the buyers represented by this 50 million. The gain is total of $5 million {$0.10 x 50 milion = $5 ealion). The buyers of the next 50 million Greebes (always consider th or marginal buyers since the buyers at the higher prices wil also be willing to buy atthe lower prise willing to pay $0.35, providing again of $0.05 ofthe consumer surplus, for a total of $2.5 mili 34 Adc Pca coos Miecononc Stent i LESSON 1 & ACTIVITY 9 (continued) 30 100 150 200 250 300 350400 QUANTITY (millions of Greebes) “Sepeesimately what will be the total consumer surplus for the buyers of the 150 million Grecbes Bees price 0f $0.30? TD auiblion ‘Be price consumers pay increases, the shaded area (increases ‘ecreases)SIf the price consumers ‘gem decreases, the shaded area (tcreasesY decreases). ‘© Se

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