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This document contains practice homework questions from Chapter 4 of the Mankiw textbook on microeconomics, focusing on demand and supply concepts. It includes multiple-choice questions, problems requiring supply-and-demand diagrams, and applications related to various market scenarios. The exercises aim to reinforce understanding of how different factors affect market equilibrium and the relationships between complementary and substitute goods.

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Sama Aljohani
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14 views

Calc 1

This document contains practice homework questions from Chapter 4 of the Mankiw textbook on microeconomics, focusing on demand and supply concepts. It includes multiple-choice questions, problems requiring supply-and-demand diagrams, and applications related to various market scenarios. The exercises aim to reinforce understanding of how different factors affect market equilibrium and the relationships between complementary and substitute goods.

Uploaded by

Sama Aljohani
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Principles of Microeconomics

Practice Homework #1 (Chapter 4)

The following questions are from the Mankiw textbook. While they won’t be collected, I suggest
you attempt these problems and write up your own answers before viewing the posted solutions.
 
1) A change in which of the following will NOT shift the demand curve for hamburgers?
a) the price of hot dogs
b) the price of hamburgers
c) the price of hamburger buns
d) the income of hamburger consumers
2) An increase in _________ will cause a movement along a given demand curve, which is
called a change in _________.
a) supply, demand
b) supply, quantity demanded
c) demand, supply
d) demand, quantity supplied
3) Movie tickets and DVDs are substitutes. If the price of DVDs increases, what happens in the
market for movie tickets?
a) The supply curve shifts to the left.
b) The supply curve shifts to the right.
c) The demand curve shifts to the left.
d) The demand curve shifts to the right.
4) The discovery of a large new reserve of crude oil will shift the _________ curve for gasoline,
leading to a _________ equilibrium price.
a) supply, higher
b) supply, lower
c) demand, higher
d) demand, lower
5) If the economy goes into a recession and incomes fall, what happens in the markets for
inferior goods?
a) Prices and quantities both rise.
b) Prices and quantities both fall.
c) Prices rise, quantities fall.
d) Prices fall, quantities rise.
6) Which of the following might lead to an increase in the equilibrium price of jelly and a
decrease in the equilibrium quantity of jelly sold?
a) an increase in the price of peanut better, a complement to jelly
b) an increase in the price of Marshmallow Fluff, a substitute for jelly
c) an increase in the price of grapes, an input into jelly
d) an increase in consumers’ incomes, as long as jelly is a normal good
Problems and Applications

1) Explain each of the following statements using supply-and-demand diagrams.


a) “When a cold snap hits Florida, the price of orange juice rises in supermarkets throughout
the country.”
b) “When the weather turns warm in New England every summer, the price of hotel rooms
in Caribbean resorts plummets.”
c) “When a war breaks out in the Middle East, the price of gasoline rises and the price of a
used Cadillac falls.”

3) Consider the market for minivans. For each of the events listed here, identify which of the
determinants of demand or supply are affected. Also indicate whether demand or supply
increases or decreases. Then draw a diagram to show the effect on the price and quantity of
minivans.
a) People decide to have more children.
b) A strike by steelworkers raises steel prices.
c) Engineers develop new automated machinery for the production of minivans.
d) The price of sports utility vehicles rises.
e) A stock market crash lowers people’s wealth.

4) Consider the markets for DVDs, TV screens, and tickets at movie theaters.
a) For each pair, identify whether they are complements or substitutes:
i) DVDs and TV screens
ii) DVDs and movie tickets
iii) TV screens and movie tickets
b) Suppose a technological advance reduces the cost of manufacturing TV screens. Draw a
diagram to show what happens in the market for TV screens.
c) Draw two more diagrams to show how the change in the market for TV screens affects
the markets for DVDs and movie tickets.

5) Over the past 30 years, technological advances have reduced the cost of computer chips.
How do you think this has affected the market for computers? For computer software? For
typewriters?

6) Using supply-and-demand diagrams, show the effect of the following events on the market
for sweatshirts.
a) A hurricane in South Carolina damages the cotton crop.
b) The price of leather jackets falls.
c) All colleges require morning exercise in appropriate attire.
d) New knitting machines are invented.
8) The market for pizza has the following demand and supply schedules:

a) Graph the demand and supply curves. What is the equilibrium price and quantity in this
market?
b) If the actual price in this market were above the equilibrium price, what would drive the
market toward the equilibrium?
c) If the actual price in this market were below the equilibrium price, what would drive the
market toward the equilibrium?

9) Consider the following events: Scientists reveal that eating oranges decreases the risk of
diabetes, and at the same time, farmers use a new fertilizer that makes orange trees produce
more oranges. Illustrate and explain what effect these changes have on the equilibrium price
and quantity of oranges.

10) Because bagels and cream cheese are often eaten together, they are complements.
a) We observe that both the equilibrium price of cream cheese and the equilibrium quantity
of bagels have risen. What could be responsible for this pattern—a fall in the price of
flour or a fall in the price of milk? Illustrate and explain your answer.
b) Suppose instead that the equilibrium price of cream cheese has risen but the equilibrium
quantity of bagels has fallen. What could be responsible for this pattern—a rise in the
price of flour or a rise in the price of milk? Illustrate and explain your answer.

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