Economics_Ch06

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Unformatted text preview: quantity supplied. 4. The price that exists in a market when quantity demanded equals quantity supplied is called the ______. 5. The quantity that exists in a market when quantity demanded equals quantity supplied is called the ______. 6. In a market, if quantity supplied is currently greater than quantity demanded, a firm’s ______ is/are above normal levels. 7. A(n) ______ is a legislated price below which legal trades cannot be made. 8. A(n) ______ is a legislated price above which legal trades cannot be made. Understanding the Main Ideas Write answers to the following questions to review the main ideas in this chapter. 1. Explain why price falls when a surplus occurs. 2. Look at the prices listed in Exhibit 6-1. At what prices does a surplus occur? What are the equilibrium price and the equilibrium quantity? 3. “All markets are necessarily in equilibrium at all points in time.” Agree or disagree? Explain. 4. What might we see when a market is experiencing a shortage? (Comment: It is not enough to say that quantity demanded is greater than quantity supplied because this answer is simply a definition of shortage. You must identify a tangible event of a shortage.) 5. Pens sell for about the same price in every city in the country, but houses do not. Why? 6. Alfred Marshall, the British economist, compared supply and demand to the two blades of a pair of scissors. Explain his thinking. 06 (128-153) EMC Chap 06 12/5/05 2:11 PM Page 151 7. Identify what will happen to equilibrium price and equilibrium quantity in each of the following cases: a. Demand rises and supply is constant. b. Demand falls by more than supply rises. c. Supply rises by more than demand rises. d. Supply falls and demand is constant. 8. Suppose you are a manager of a grocery store. How would you know which goods were in shortage? In surplus? 9. Both the demand for and the supply of a good rise. Under what condition will the price of the good remain constant? 10. Some National Basketball Association (NBA) players receive annual incomes of several...
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This document was uploaded on 01/16/2014.

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