pres08_ass2_sol

pres08_ass2_sol - W1105.002 Principles of Economics...

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W1105.002 Principles of Economics Assignment 2, due Febr. 7 th 2008 Before submitting your assignment, please make a copy for your own use. Your assignment will not be returned to you before the recitation sessions. Be sure you include: Name: Recitation Section # Multiple Choice Questions – Underline your answer 1. Other things equal, a decrease in the price of fresh fruit would, a. decrease the demand for fresh fruit. b. decrease the quantity supplied of fresh fruit. c. shift the supply of fresh fruit to the left. d. decrease the quantity demanded of fresh fruit. 2. If the price of a product is set below equilibrium a. there is a shortage of the good. b. a black market will soon develop c. the quality of the units of the product sold might decrease. d. all of the above are correct. 3. Bread and jelly are complement goods. An increase in the price of bread will a. cause a shortage of bread. b. increase the demand for jelly. c. decrease the supply of jelly. d. none of the above is correct. 4. Which of the following would NOT cause an increase in the demand for cotton apparel? a. an increase in consumers’ income and wealth. b. a decrease in the price of cotton fabric. c. an increase in the price of synthetic apparel. d. an announcement by the CDC (Center for Disease Control) that wool clothes are the main cause of asthma attacks in adults. Definitions Substitute good: a good (or service) that serves the same purpose. When the price of a substitute good increases, demand increases and demand curve shifts to the right. Quantity Supplied: the amount of a product that sellers are willing and able to sell at a given price. When quantity supplied is equal to quantity demanded, a market is in equilibrium. 1
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Exercises: 1. All fish prepared in NYC restaurants passes through the New Fulton Street Market, the largest consortium of wholesale fish sellers in the country. At the market, each day, 37 wholesalers sell catch coming from all over the world to hundreds of buyers. Consider the market for salmon fish at the New Fulton Street Market. For each of the events below, indicate whether demand or supply increases or decreases and why. Then, using a supply-demand diagram, illustrate the effect of the event on the price and quantity of tuna sold at the market. A.
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pres08_ass2_sol - W1105.002 Principles of Economics...

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