3.1 Explain
the law of demand. Why does a demand curve slope downward? How is a
market demand curve derived from individual demand curves? LO1
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3.2 What
are the determinants of demand? What happens to the demand curve when
any of these determinants change? Distinguish between a change in demand
and a movement along a fixed demand curve, noting the cause(s) of each.
LO1
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3.3 What effect will each of the following have on the demand. for small automobiles such as the Mini-Cooper and Smart car? LO1a. Small automobiles become more fashionable.b. The price of large automobiles rises (with the price of small autos remaining the same).c. Income declines and small autos are an inferior good.d. Consumers anticipate that the price of small autos will greatly come down in the near future.e. The price of gasoline substantially drops.
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3.4 Explain
the law of supply. Why does the supply curve slope upward? How is the
market supply curve derived from the supply curves of individual
producers? LO2
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3.5 What
are the determinants of supply? What happens to the supply curve when
any of these determinants changes? Distinguish between a change in
supply and a change in the quantity supplied, noting the cause(s) of
each. LO2
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3.6 What effect will each of the following have on the supply of auto tires? LO2a. A technological advance in the methods of producing tires.b. A decline in the number of firms in the tire industry.c. An increase in the prices of rubber used in the production of tires.d. The expectation that the equilibrium price of auto tires will be lower in the future than currently.e.
A decline in the price of the large tires used for semi trucks and
earth-hauling rigs (with no change in the price of auto tires).f. The levying of a per-unit tax on each auto tire sold.g. The granting of a 50-cent-per-unit subsidy for each auto tire produced.
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3.7 “In
the corn market, demand often exceeds supply and supply sometimes
exceeds demand.” “The price of corn rises and falls in response to
changes in supply and demand.” In which of these two statements are the
terms “supply” and “demand” used correctly? Explain. LO2
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3.8 In
2001 an outbreak of hoof-and-mouth disease in Europe led to the burning
of millions of cattle carcasses. What impact do you think this had on
the supply of cattle hides, hide prices, the supply of leather goods,
and the price of leather goods? LO4
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3.9 Critically
evaluate: “In comparing the two equilibrium positions in Figure 3.7b , I
note that a smaller amount is actually demanded at a lower price. This
refutes the law of demand.” LO4 Reference Figure 3.7b ...
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3.10 For
each stock in the stock market, the number of shares sold daily equals
the number of shares purchased. That is, the quantity of each firm’s
shares demanded equals the quantity supplied. So, if this equality
always occurs, why do the prices of stock shares ever change? LO4
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3.11 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 table below. Suppose
that the government establishes a price ceiling of $3.70 for wheat. What
might prompt the government to establish this price ceiling? Explain
carefully the main effects. Demonstrate your answer graphically. Next,
suppose that the government establishes a price floor of $4.60 for
wheat. What will be the main effects of this price floor? Demonstrate
your answer graphically. LO5...
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3.12 What
do economists mean when they say “price floors and ceilings stifle the
rationing function of prices and distort resource allocation”? LO5
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3.13 LAST WORD
In some countries, such as France, every corpse; is available for
doctors to “harvest” for organs unless the deceased, while still alive,
signed a form forbidding the organs to be harvested. In the USA,it is
the opposite:No harvesting is allowed unless the deceased had
signed,while still alive, an organ,donor form authorizing dectors to
harvest any needed organs. Use supply and demand figures to show in
which country organ shortages are likely to be less severe.
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