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Auburn ECON 2020 - Assignment 4 Micro

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1. For question 1 answer: a) The term Economics itself has its origin from what language?- Greek from combining 2 words. Oikos and Nemos b) as mentioned in your notes, often an economy size product or package might be a larger product (larger detergent bottle or cereal box), but sometimes it is smaller (a 'smaller' or compact car vs. a full size car/vehicle). Think of an example from your own experience of some other : i) larger 'economy' size product- family size Doritos (17 oz.) ii) smaller 'economy' size product- the regular size bag of Doritos (9.75 oz.) 2. How important is the idea/concept of scarcity to the subject of economics? (explain in a sentence or two). -Scarcity forces people to chose how they will use their resources in an attempt tosatisfy their unlimited wants and desires. Economics is about making choices andwithout scarcity there would be no economic problem. “Without Scarcity there is no need to economize and therefore no economics”—Walter Williams Answer questions related to Supply & Demand based on text or notes 1. a) According to your text, if anything exemplifies microeconomics it is what model? - a demand model b) How are movements along a demand curve different from a shift in the demand curve? - A shift in demand either increase or decrease. A movement along a demand curve 2. a) According to the law of demand, if the price of a good or service increases, one would expect the quantity demand to increase or decrease? -Decrease b) According to the law of demand, if the price of a good or service decreases, one would expect the quantity demand to increase or decrease? -Increase3. Answer the following related to notes and or text information a) Suppose that name brand "Cheerios" are considered a "normal" good and an individuals income increases. What could be expected to happen to the demand for Cheerios?- decreases b) Suppose that "Store Brand" version of Cheerios cereal is considered an inferior good and an individuals income increases. What could be expected to the demand for "store brand" version of Cheerios?- decrease c) Given the rule for "Compliments" and demand: suppose that milk & cereal are complimentary goods. Then suppose that the price of milk decreases. What might one expect to happen to the demand for cereal?- increases d) Given the rule for "Substitutes" and demand: suppose that Coca Cola & Sam's Choice Cola are substitute goods. Then suppose that the price of Coca Cola increases. What would one expect to happen to the demand for Sam's Choice Cola?- increase e) Consider the rule for expectations & a situation such as an expected/predicted snowstorm in areas of Alabama. People's expectations that the snow COULD lead to power outages & or the inability to drive on roads for 24-72 hrs, demand for milk or bread in advance of the predicted snow might increase or decrease?- increase f) Suppose the number of buyers of "Product X" decrease. Based on the rules for changes in demand, one would expect demand to: increase or decrease?- decrease g) Suppose that a product becomes more fashionable or trendy. Based on the rules for changes in demand, one would expect demand to: increase or decrease?- increase 4. Does the following definition best fit for supply or demand: ...."a schedule or curve showing the various amounts of a product that producers are willing & able to provide for sale at various prices at a given time."- supply 5. Answer the following for supply a) According to the law of supply, if the price of a good or service increases, one would expect the quantity supplied to increase or decrease?- increase b) According to the law of supply, if the price of a good or service decreases, one would expect the quantity supplied to increase or decrease?- decrease 6. Answer the following related to shifts in the supply curve:a) Given the rule for "input prices" and supply curve shifts imagine the following: Suppose that the price of mozzarella cheese used to make "Brand X" frozen pizza increases. One would expect the supply of "Brand X" frozen pizza to : Increase or decrease?- increases b) Based on the rule for supply curve shifts and expectations, what would be expected to happen to the supply of roses: i) in the days and weeks immediately before Valentine's day?- increases ii) in the days and weeks immediately after Valentine's day?- decrease c) Suppose that a politician recommends an additional tax be placed on the production & sale of SUV's. Based on the rules for supply curve shifts, one would expect the supply of SUV's to : increase or decrease? decrease d) a subsidy is a payment provided by the government to produce a good or service. Suppose that the US government provides a subsidy to farmers of corn in the US (which it actually does). One would expect that this would lead to what change in the supply of corn: increase or decrease?- increase e) Suppose that a severe drought impacts major tomato growing regions of California. One would expect the supply of tomatoes to: increase or decrease?- decrease f) Suppose that there is an increase in the number of companies making face masks. One would expect the supply of face masks to: increase or decrease- increase 7. Answer the following from the text or notes: a) The point where Quantity Supply (Qs) is equal to Quantity Demand (Qd) is also known as what? - equilibrium price b) If the supply curve increases (shifts to the right), what would happen to the Price equilibrium (Peq)? (Increase or decrease?)- decrease c) If the supply curve decreases (shifts to the left), what would happen to the Price equilibrium (Peq)? (Increase or decrease?)- increase d) If the supply curve increases (shifts to the right), what would happen to the Quantity equilibrium (Qeq)? (Increase or decrease?)- increase e) If the demand curve increases (shifts to the right), what would happen to the Price equilibrium (Peq)? (Increase or decrease?)- decreasef) If the demand curve increases (shifts to the right), what would happen to the Quantity equilibrium (Qeq)? (Increase or decrease?)- increase g) If the demand curve decreases (shifts to the right), what would happen to the Price equilibrium (Peq)? (Increase or decrease?)- decrease h) If the demand curve decreases (shifts to the right), what would happen to the Quantity equilibrium (Qeq)? (Increase or decrease?)- decrease 8.


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