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Microeconomics questions about Supply, Demand, Equilibrium

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The questions are in the attachment files 1 and 2.

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Question 1

Define or explain the following economic terms:

a) Quantity demanded
b) Quantity supplied
c) Market equilibrium
d) Consumer surplus
e) Price elasticity of demand

Question 2

By using the midpoint formula, calculate the price elasticity for each of the following changes in demand by a household.
______________________________________________________________________________
Demand for P1 P2 Q1 Q2
______________________________________________________________________________

(a) Long-distance phone service $0.25 per min. $0.15 per min. 300 min. 400 min.
per month per month

(b) Orange juice 1.50 per qt. 1.90 per qt. 14 qt 12 qt
per month per month
_______________________________________________________________________________

Question 3

Do you agree or disagree with each of the following statements? Briefly explain your answers.

(a) The price of a good rises, causing the demand for another good to fall. The two goods are therefore substitutes.
(b) If demand increases and supply increases at the same time, price will clearly rise.
(c) A shift in supply causes the price of a good to fall. The shift must have been an increase in supply.
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Solution Preview

Please see the attached files for the complete solution:

Define or explain the following economic terms:

a) Quantity demanded

The total amount that an individual or a group of individuals would choose to buy at a particular price

b) Quantity supplied

The total amount of a good or service ...

Solution Summary

The solution includes excel and word files that defines some microeconomics terms as well as a solution to a problem asking for equilibrium quantity and price together with a graph.

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Microeconomics assignment questions

Demand and Supply Schedule for Rap Music CDs

Price Quantity Demanded Quantity Supplied
10 70 million 20 million
11 65 million 40 million
12 60 million 60 million
13 55 million 80 million
14 50 million 100 million

a) Using the given supply and demand schedule above, graph the supply and demand curves for rap music CDs.

b) What are the equilibrium price and quantity? In other words, where is Qd = Qs? What is the quantity that matches in both columns and what is the price at that point?
Equilibrium quantity, where quantity demanded is equal to quantity supplied, is ________ million.
Equilibrium price, that price at which Qd = Qs, is ____________

c) At a price of $13, is there is shortage or surplus? How much is the shortage or surplus?
In other words, what is the quantity demanded at a price of $13? __________________
What is the quantity supplied at a price of $13? ______________________
Which is larger at a price of $13, quantity demanded or quantity supplied? ___________
By how many millions of units is one bigger than the other? ______________ million
If quantity demanded is larger, there is a shortage. If quantity supplied is larger, there is a surplus. Which do we have here, a shortage or a surplus? ___________________

d) Show graphically what happens to the market for rap music CDs if the price of CD players increases. What are the new equilibrium price and quantity?
Suppose that the price of CD players increases. CDs and CD players are goods typically consumed together, so they are called __________________.
If the price of CD players increases, people will buy fewer CD players. That's the Law of Demand. However, they will also change their entire demand for rap music CDs as well. Since they'll be buying fewer CD players, will they need more or fewer CDs to play on the CD players they're not buying? __________________ (more or fewer?)

Let's suppose that the new demand schedule looks like this:

Price Quantity Demanded Quantity Supplied
10 45 million 20 million
11 40 million 40 million
12 35 million 60 million
13 30 million 80 million
14 25 million 100 million

What is the new equilibrium? The new equilibrium quantity, where Qd = Qs, is ______
and the new equilibrium price, the price at which Qd = Qs, is $_________
Plot the new demand curve with the old one. Is the new one to the left or the right of the old one? ________________ (left or right?)
If the new demand curve is on the right side of the old one, then demand has increased. If the new demand curve is on the left side of the old one, then demand has decreased. Which is it? Did demand for rap music CDs increase or decrease? _________________
Finally, how did the equilibrium price and quantity change in direction? Did they increase or decrease?
Equilibrium price of rap music CDs ______________ (increased or decreased?) after the price of the CD players increased. Equilibrium quantity of rap music CDs _______________ (increased or decreased?) after the price of the CD players increased.

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