When the demand and the supply for bread increases simultaneously, will we able determine their effects on the equilibrium price?
What will be an ideal response?
No. An increase in the demand creates an upward pressure on the equilibrium price. An increase in supply creates a downward pressure on the equilibrium price. The only way to determine the effect of the shift of both curves is to determine which shift, supply of demand, is larger.
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A market has four individuals, each considering buying a grill for his backyard. Assume that grills come in only one size and model. Abe considers himself a grill-master, and finds a grill a necessity, so he is willing to pay $400 for a grill. Butch is a meat-lover, honing his grilling skills, and is willing to pay $350 for a grill. Collin just met the girl of his dreams, and she loves a good grilled steak, so in his effort to impress her he is willing to pay $320 for a grill. Daniel loves grilled shrimp and thinks it might be cheaper in the long run if he buys a grill instead of eating out every time he wants grilled shrimp, so he is willing to pay $200 for a grill.
Given the scenario described, if the market price of grills falls from $395 to $340, then we can say: A. Abe's consumer surplus increases from $5 to $60, and total consumer surplus increases from $5 to $70. B. Abe's consumer surplus decreases from $60 to $5, and total consumer surplus decreases from $70 to $5. C. Collin's consumer surplus increases from $0 to $20, and total consumer surplus increases from $5 to $70. D. Butch's consumer surplus decreases from $10 to $0, and total consumer surplus increases from $10 to $80.
You pay for cheese and bread from the deli with currency. Which function of money does this best illustrate?
a. medium of exchange b. unit of account c. store of value d. liquidity
Higher interest rates ____ the ____ cost of holding currency and therefore reduce the quantity of currency demanded.
A. decrease; opportunity B. increase; transaction C. decrease; transaction D. increase; opportunity
What happens to real money demand (rise, fall, no change) due to a change in each of the following factors?
(a) A tax on stock market transactions is introduced. (b) Computerized bond trading reduces transactions costs. (c) People's average level of wealth rises. (d) The threat of a recession increases the riskiness of stocks and bonds. (e) The interest rate paid on checking account balances declines. (f) The price level falls in a one-time jump.