Microeconomics

Week 2 Assignment

Ending each chapter and appendix in the text are the chapter summary, terms and concepts, and study questions. You are to review the chapter summary and the terms and concepts and then prepare answers to the following study questions.

3: #3 (a, b, c, and d)

What effect will each of the following have on the demand for small automobiles such as the Mini Cooper and Smart car?

a. Small automobiles become more fashionable.

Ans.

Demand will increase as consumers are convinced they are better products

b. The price of large automobiles rises (with the price of small autos remaining the same)

Ans.

Demand will increase for small autos because consumers do have a good alternative to large autos where they will save money.

c. Income declines and small autos are an inferior good.

Ans.

Demand for small autos will decrease because the purchasing powers of people are decreased.

d. Consumers anticipate that the price of small autos will greatly come down in the near future.

Ans. Demand will decrease

6 (a, b, c, and d),

What effect will each of the following have on the supply of auto tires?

a. A technological advance in the methods of producing tires.

Ans. Supply will increase

b. A decline in the number of firms in the tire industry.

Ans. Supply will decrease

c. An increase in the prices of rubber used in the production of tires.

Ans. Supply will decrease

d. The expectation that the equilibrium price of auto tires will be lower in the future than currently.

Ans. Supply will increase

#8 (a and c),

Suppose the total demand for wheat and the total supply of wheat per month in the Kansas City grain market are as shown in the accompanying table.

a. What is the equilibrium price? What is the equilibrium quantity? Fill in the surplus-shortage column and use it to explain why your answers are correct.

Ans:

The equilibrium price is $4.00 and the equilibrium quantity is 75.

c. Why will $3.40 not be...