Supply and Demand Equilibrium

I. Quiz

A. Multiple Choice. Choose the best answer.

1. In a market for tomatoes, the quantity of tomatoes consumers want to purchase at each price is called

A. Equilibrium Price.
B. Equilibrium Quantity.
C. Demand.
D. Supply.

2. Why would a price that creates a shortage not be an equilibrium price? Because the,

A. Price will be pushed down.
B. Price will be pushed up.
C. Quantity supplied at that price is too large.
D. Quantity demanded at that price is too small.

3. The equilibrium price is the price,

A. That averages buyer values.
B. That averages Seller costs.
C. At which the quantity supplied equals the quantity demanded.
D. At which the quantity supplied exceeds the quantity demanded.

4. Each point on the supply curve represents

A. The highest price buyers will pay for a good.
B. The lowest price sellers will accept for the last unit supplied.
C. The lowest price buyers will accept for all units produced.
D. The highest price sellers can get for each unit over time.

5. If more peanuts are offered for sale at a given price then are purchased, then there is

A. A surplus.
B. A shortage.
C. An equilibrium.
D. A demand shift.

6. Voluntary exchange

A. Allows both buyers and sellers to gain.
B. Allows buyers to gain at the expense of sellers.
C. Prevents markets from working efficiently.
D. Allows sellers to gain at the expense of buyers.

7. Supply is

A. The quantity purchased at a given price.
B. The quantity sold at a given price.
C. The quantity traded when a market is in equilibrium.
D. When more is sold at a given price.

8. The "law of demand" refers to the fact that, all other things remaining constant on the demand side
of the market, when the price of a commodity rises

A. there will be a movement to the left along the demand curve.
B. there will be a movement to the right along the demand curve
C. the demand curve will shift leftward.
D. the demand curve will shift rightward.

9. The "law of supply" states that

A. firms will produce more of a good the higher consumers bid up its price.
B. firms will produce less of a good the more it costs to produce it.
C. firms will produce less of a good as the required resources become more and more scarce.
D. firms will produce more of a good the less it costs to produce it.

10. When a market is in equilibrium,

A. the supply curve will have exactly the same slope as the demand curve.
B. the benefit to buyers is exactly equal to the profit of sellers.
C. there is no shortage and no surplus at the existing market price.
D. everyone in the community has all they want of the commodity in question.

11. Which of the following is the best way to describe market equilibrium? At equilibrium,

A. the price charged is usually affordable to most people.
B. the price charged is the lowest possible.
C. quantity supplied equals quantity demanded.
D. the supply and demand curves can never shift again.

12. Ticket scalpers at the NCAA basketball tournament last year charged prices well above the printed ticket price. This is evidence of

A. the tournament not being televised.
B. the tournament getting too much television exposure.
C. a surplus at printed ticket prices.
D. a shortage at printed ticket prices.

13. A market finds equilibrium because

A. buyers and sellers are greedy.
B. buyers know how much profit sellers are making.
C. sellers know the most each buyer will pay.
D. the government picks the equilibrium price.

14. The "law of supply" refers to the fact that, all other things remaining constant on the supply side of
the market, when the price of a commodity increases

A. the supply curve will shift rightward.
B. there will be a movement to the left along the supply curve.
C. there will be a movement to the right along the supply curve.
D. the supply curve will shift leftward.

15. The "law of demand" is generally the result of

A. anything that causes a demand curve to shift.
B. anything that causes a supply curve to shift.
C. increases or decreases in peoples incomes.
D. "other things not being equal" on either the supply side or the demand side of the market.

16. When a market is in equilibrium,

A. everyone in the community has all they want of the commodity in question.
B. the number of buyers is exactly equal to the number of sellers.
C. the supply curve will have exactly the same slope as the demand curve.
D. there is no shortage and no surplus at the existing market price.

17. A market is comprised of

A. just demanders.
B. just suppliers.
C. both suppliers and demanders.
D. salesmen.

Use the following table to answer questions 18-22:

Columns 1 and 2 report quantities.

18. As price decreases, the behavior of the data in Column 1 is most consistent with

A. a supply curve.
B. excess demand.
C. excess supply.
D. a demand curve.

19. As price decreases, the behavior of the data in Column 2 is most consistent with

A. a supply curve.
B. excess demand.
C. excess supply.
D. a demand curve.

20. The market reaches an equilibrium at a price of

A. $12.50.
B. $10.
C. $7.50.
D. $5.

21. At a price of $10.00, the market experiences

A. a shortage.
B. excess demand.
C. a surplus.
D. an equilibrium.

22. If a price is below the equilibrium value,

A. producers can't sell all they make.
B. neither buyer nor seller wishes to alter their behavior.
C. buyers will start to bid the price up.
D. a surplus develops.

II. Study Questions

23. You're given the following individuals and the highest price at which they will want to buy a t-shirt. At a higher price, each person will not want to buy. Each person will only buy one item, if the price is right.

Larry 20, Peg 19, Liz 18, Cathy 18, Chris 17, Ed 16, Marylin 15, Jennifer 14, Michael 13.

a. Determine the market demand table.

b. Graph the demand curve.

c. If the current market price is $14, what's total market demand? If the price is $19?

d. Say that an advertising campaign makes each person willing to pay two additional dollars. Illustrate

graphically what will happen to the demand curve.

24. You are given the following individuals and the lowest price at which they will sell their t-shirt. At a lower price, each person will not sell. Each person will only sell one item, if the price is right.

Frank 19, Margaret 18, Steve 17, John 16, Denise 15, Jose 14, Catherine 13, Shelly 12.

a. Determine the market supply table.

b. Graph the supply curve.

c. If the current market price is $14, what's total market supply? If the price is $19?

d. Say that new computers make each person willing to sell for two dollars less than otherwise.

Illustrate graphically what will happen to the supply curve.

25. Draw supply and demand curves for questions 23 and 24. What will be the equilibrium price and quantity? Why is$14 not the equilibrium price?

26. What will happen to the market outcome in question 3 if the government says a t-shirt cannot be sold for more than $14. Who benefits and who suffers? What if the government says a t-shirt cannot be sold for less than $18. Who benefits and who suffers?

27. Draw the supply curve for tickets to a basketball game if all seating is general admission at a fixed price. Remember, the hall has a limited capacity.