Answers Microeconomics

1a Markets, demand and supply

01 Price and quantity 1



Price
Supply
5 Excess supply = 100

2
Demand
1
Quantity

50 60 100 150

Excess demand = 50
  Price = 1 Excess demand = 50
 Price = 4 Excess supply = 100

02 Price and quantity 2

 Price of cocoa falls: Supply rises, price falls, quantity rises

 People become health conscious: Demand falls, price falls, quantity falls
 Combination of  and : Price falls, quantity can rise or fall (or does not
change)

03 Price and quantity 3

Equilibrium if quantity demanded = quantity supplied:

2200 - 200P = 800 + 500P
1400 = 700 P
P (Price)= 2
Q (Quantity) = 1800

04 Movements along the demand curve vs shifts in demand

The statement is false. If the price of a good falls, quantity demanded is increased (=
movement along the demand curve).

AMICR1.DOC Page 1 (of 4) 1a Markets, demand and supply 2016-11-26

05 Shifts in demand and in supply
   
 Supply (S) or demand (D) D S D S
 Increasing (i) or decreasing (d) i i i d
 Price (P), Quantity (Q) P+,Q+ P-,Q+ P+,Q+ P+,Q-

06 Consumer and producer surplus

Price Consumer
surplus
Supply

P*

Producer Demand
surplus
Quantity
Q*

07 Normal and inferior goods

 X is a normal good.
Price Market for good X
Supply

P*
P*
Demand 1

Quantity
Q* Q* Demand 2
 X is an inferior good.
Price Market for good X
Supply

P*
P*
Demand 2
Demand 1

Quantity
Q* Q*

AMICR1.DOC Page 2 (of 4) 1a Markets, demand and supply 2016-11-26

08 Subsitutes and complements
 A and B are substitutes.
Price Market for A
Supply

P*
P*
Demand 2
Demand 1

Quantity
Q* Q*
 A and B are complements.
Price
Market for A
Supply

P*
P*
Demand 1

Quantity
Q* Q* Demand 2

09 Minimum price

Market for milk

Price
Excess supply Supply
Minimum price

P*

Demand

Quantity
Q*

AMICR1.DOC Page 3 (of 4) 1a Markets, demand and supply 2016-11-26

10 Maximum price

Market for housing

Price
Supply

P*
Maximum price

Demand
Quantity
Q*

Excess demand

To 1b Markets, demand and supply (Multiple choice)

 Back to questions. Click here!

AMICR1.DOC Page 4 (of 4) 1a Markets, demand and supply 2016-11-26