QUESTION: Please help explain 'Supply and Demand' and what determines 'Demand'. ANSWER: Glad you asked. This is the essentials of Economics. Here is a Real-World Example: How Peanut Butter Prices Affect Demand for Jelly. Goods are often related. This means that one economic event can affect multiple markets. Goods are not isolated in some sort of single-market vacuum. A change in the price of one good can affect it
and other goods as well. However, the effects will be different! Consider an increase in the price of peanut butter. When the price of peanut butter increases, there is a decrease in the quantity demanded for peanut butter (an upward movement along the peanut butter demand curve). This is the first law of demand. The demand for jelly will also be affected. Remember that peanut butter and jelly are complements. Because we are consuming less peanut butter, we consume less jelly also,
even though the price of jelly didn't change. The demand for jelly decreases (jelly demand curve shifts inward). Now consider the impact of a rise in the price of peanut butter on the demand for a substitute like almond butter. The demand for almond butter will also be affected. In the previous tip, peanut butter and jelly were complements. Because we are consuming less peanut butter, we consume less jelly also, even though the price of jelly didn't change. With substitutes, the effect
works in reverse. Consumers tend to buy peanut butter or almond butter, but not both. A rise in the price of peanut butter will lead many consumers to substitute almond butter for peanut butter, hence the demand for almond butter will rise (its demand curve shifts to the right). So there you have it! Your real world lesson in Economics!
31. Peanut butter and jelly are complements. A decrease in the price of one will result in:A. A decrease in the demand for the other.B. A decrease in the quantity demanded of the other.C. An increase in the demand for the other.D. An increase in the quantity demanded of the other.
32. Assume a series of forest fires reduces the supply of lumber which is an input in the production ofwooden bats. Baseballs and wooden bats are complements. If the price of wooden bats increases, we canexpect the:
34. A change in demand means there has been a shift in the demand curve, and a change in quantity demanded:
35. Market demand is determined by all of the followingexceptfor:A. The number of potential sellers.B. Income.C. Tastes.D. Expectations about future income.
36. To calculate market demand we:
37. Which of the following is a determinant of supply?
38. Which of the following is a determinant of supply?
We have textbook solutions for you!
The document you are viewing contains questions related to this textbook.
Expert Verified
39. A change in the price of a good:A. Causes a shift in the supply curve.B. Results in a change in quantity supplied.C. Results in a change in supply.D. Is a determinant of supply.
12.Peanut butter and jelly are complements. A decrease in the price of one will result in:A) An increase in the demand for the otherB) A decrease in the quantity demanded of the otherC) A decrease in the demand for the otherD) An increase in the quantity demanded of the otherCorrect Answer(s):APoints Earned:2.0/2.0
13.Which of the following events would cause a rightward shift in the market supply curve for automobiles?Points Earned:0.0/2.0
14.The equilibrium price and quantity in the above graph are, respectively:Points Earned:1.0/1.0
15.If the actual market price were fixed at $15 per unit in the above graph:Points Earned:1.0/1.0
We have textbook solutions for you!
The document you are viewing contains questions related to this textbook.
Exploring Macroeconomics
Sexton
Expert Verified
We have textbook solutions for you!
The document you are viewing contains questions related to this textbook.
The document you are viewing contains questions related to this textbook.
Exploring Macroeconomics
Sexton
Expert Verified