Principles of Microeconomics Semester A 2020-2019

Problem Set #3 Demand and Supply

This document contains 8 pages
Lecturer: Dr. Yael Hadass
Teaching Assistant: Avigayil Holder
Grader: Ira Friedman.

Part A: Open Questions - Demand

1. Changes in Demand and in Quantity demanded
For each task, please describe the curves in a graph, pick one of the three options and write down the
reason for a curve-shift when applicable (e.g., increase in a price of a substitute).

a) What would happen to the demand for foreign holidays if there were an increase in consumer
incomes?

Price

a) DEMAND INCREASES
b) DEMAND DECREASES
c) QUANTITY DEMANDED CHANGES

Reason: _________________________________
Quantity
b) What would happen to the demand for hot dogs if you lost your job, under the condition that hot dogs
are considered an inferior good for you (opposed to steaks in restaurants)?

Price

a) DEMAND INCREASES
b) DEMAND DECREASES
c) QUANTITY DEMANDED CHANGES

Reason: _________________________________
Quantity

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c) What would happen to the demand for waffles if a price of French pancakes increases?

Price

a) DEMAND INCREASES
b) DEMAND DECREASES
c) QUANTITY DEMANDED CHANGES

Reason: _________________________________
Quantity
d) What would happen to the demand for mobile phone apps if a price of mobile phones decreases
significantly?

Price

a) DEMAND INCREASES
b) DEMAND DECREASES
c) QUANTITY DEMANDED CHANGES

Reason: _________________________________
Quantity

e) What would happen to the demand for fizzy drinks if there was a well-researched article about
dangerous consequences of their consumption on our health in a national newspaper?

Price

a) DEMAND INCREASES
b) DEMAND DECREASES
c) QUANTITY DEMANDED CHANGES

Reason: _________________________________
Quantity

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Part B: Multiple Choice Questions - Demand
1. Pizza is a normal good if the demand

a. for pizza rises when income rises.

b. for pizza rises when the price of pizza falls.
c. curve for pizza slopes upward.
d. curve for pizza shifts to the right when the price of burritos rises, assuming pizza and burritos
are substitutes.

2. Which of the following would shift the demand curve for gasoline to the right?

a. a decrease in the price of gasoline

b. an increase in consumer income, assuming gasoline is a normal good
c. an increase in the price of cars, a complement for gasoline
d. a decrease in the expected future price of gasoline

3. Suppose that a decrease in the price of good X results in fewer units of good Y being
demanded. This implies that X and Y are

a. complementary goods.
b. normal goods.
c. inferior goods.
d. substitute goods.

4. Holding all other things constant,

a higher price for ski lift tickets would

a. increase the number of skiers.
b. increase the price of skis.
c. decrease the number of skis sold.
d. decrease the demand for other winter recreational activities.

5. Economists normally

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a. do not try to explain people's tastes, but they do try to explain what happens when tastes change.
b. believe that they must be able to explain people's tastes in order to explain what happens when
tastes change.
c. do not believe that people's tastes determine demand, so they ignore the subject of tastes.
d. incorporate tastes into economic models only to the extent that tastes determine whether pairs of
goods are substitutes or complements.

Part : Open Questions - Supply

For each task, please provide a graph, pick one of the three options and write down the reason for a curve-
shift when applicable (e.g., increase in a price of an input).

a) What would happen to the supply of foreign holidays if there were a fall in the price of foreign
holidays?

Price

a) SUPPLY INCREASES
b) SUPPLY DECREASES
c) QUANTITY SUPPLIED CHANGES

Reason: _________________________________
Quantity

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b) What would happen to the supply of electric cars if there was an improvement in the technology used
to produce them?

Price

a) SUPPLY INCREASES
b) SUPPLY DECREASES
c) QUANTITY SUPPLIED CHANGES

Reason: _________________________________
Quantity

c) What would happen to the supply of personal computers if there was a significant increase in prices of
computer chips (which are necessary to build PCs)?

Price

a) SUPPLY INCREASES
b) SUPPLY DECREASES
c) QUANTITY SUPPLIED CHANGES

Reason: _________________________________
Quantity

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d) What would happen to the supply of carrot soup if there was a shortage of carrots in the market?

Price

a) SUPPLY INCREASES
b) SUPPLY DECREASES
c) QUANTITY SUPPLIED CHANGES

Reason: _________________________________
Quantity

Part B: Multiple Choice Questions

6. When quantity supplied decreases at every possible price, we know that the supply curve
has

a. shifted to the left.

b. shifted to the right.
c. not shifted; rather, we have moved along the supply curve to a new point on the same curve.
d. not shifted; rather, the supply curve has become flatter.

7. Matthew bakes apple pies that he sells at the local farmer’s market. If the price of apples
increases, the

a. supply curve for Matthew’s pies will increase.

b. supply curve for Matthew’s pies will decrease.
c. demand curve for Matthew’s pies will increase.
d. demand curve for Matthew’s pies will decrease.