Interpret what an increase in demand and an increase in supply mean. Discuss the causes of an increase in demand and an increase in supply. How are increases in demand and supply expressed graphically?
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What will be an ideal response?
An increase in demand means buyers will buy more at any price; or are willing and able to pay more to get any given quantity. Increases in demand can be caused by increases in tastes for the product, an increase in incomes (if the product is normal), an increase in the price of a substitute, a lower priced complement, and expectations of a higher future price. There are many other factors that could cause an increase in demand. An increase in demand is reflected graphically as a rightward shift of the demand curve. An increase in supply means sellers will put more up for sale at any price; or are willing and able to accept a lower price to make any given quantity available for sale. Increases in supply are generally caused by anything that reduces costs of production (e.g. increases in technology, lower resource costs) or increases in the number of sellers. An increase in supply is reflected graphically as a rightward shift of the demand curve.
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Answer the following statement true (T) or false (F)
In the dynamic aggregated demand and aggregate supply model, inflation occurs if
A) SRAS shifts faster than AD. B) AD shifts slower than SRAS. C) LRAS shifts faster than AD. D) AD shifts faster than SRAS.
Which of the following would likely increase private saving?
a. Both expansion of IRA type accounts and a consumption tax. b. Expansion of IRA type accounts, but not a consumption tax. c. A consumption tax, but not expansion of IRA type accounts. d. Neither expansion of IRA type accounts nor a consumption tax.
A study of consumers' attitudes toward labor standards for the products they buy revealed that consumers:
a. just do not care. b. would completely change their buying patterns and want to be 100% sure that products they buy are made in foreign factories with good working conditions. c. would pay a slight premium to ensure good working conditions. d. are more concerned about the prices they pay than working conditions overseas.