Question

name: eco 2123 - test 1 - chapters 1, 4 - 6

1. (8 points) list 2 determinants of supply that can and will affect how much of any good producers choose to sell at any given price and and explain and give a specific example of one of the determinants.

a)
b)

1. (6 points) refer to the following table to answer the following questions:

price	qd	qs
8	20	45
6	30	30
4	40	15
2	50	10

a) the equilibrium price and quantity, respectively, are $__ and __ units.
b) if the actual price in this market were $10, there would be a __ of __ units.
c) if the actual price in this market were $4, there would be a __ of __ units.

1. (5 points) consider the market for electric cars. assume electric cars are a normal good. for each of the following events, identify if the event is a determinant of demand or supply by putting an x in the appropriate column.

event	demand determinant	supply determinant
people increase their concern for the environment.
an economic boom raises peoples wealth.
a strike by aluminum workers raises the price of aluminum.
the price of gas - powered cars falls.

Explanation:

Step1: Recall supply determinants

Supply determinants include input - prices, technology, number of sellers, expectations, etc. For example, input - price is a determinant. If the price of steel (an input for car production) decreases, car producers will be more willing to supply cars at each price level. Another determinant is technology. If a new, more efficient production technology is developed for smartphones, producers can supply more smartphones at each price.

Step2: Find equilibrium in the table

Equilibrium occurs where quantity demanded (QD) equals quantity supplied (QS). Looking at the table, when the price is $6, QD = 30 and QS = 30. So the equilibrium price is $6 and the equilibrium quantity is 30 units.

Step3: Analyze price of $10

When the price is $10, QD = 10 and QS = 60. Since QS>QD, there is a surplus. The amount of the surplus is QS - QD = 60 - 10=50 units.

Step4: Analyze price of $4

When the price is $4, QD = 40 and QS = 15. Since QD>QS, there is a shortage. The amount of the shortage is QD - QS = 40 - 15 = 25 units.

Step5: Categorize determinants for electric - car market

1. New automated machinery for electric - car production is a supply determinant as it affects the cost and efficiency of production.
2. People's increased concern for the environment increases the demand for electric cars (a normal good), so it is a demand determinant.
3. An economic boom raising people's wealth increases the demand for normal goods like electric cars, so it is a demand determinant.
4. A strike by aluminum workers raising the price of aluminum increases the cost of production for electric cars (if aluminum is an input), so it is a supply determinant.
5. A fall in the price of gas - powered cars makes gas - powered cars more attractive relative to electric cars, reducing the demand for electric cars, so it is a demand determinant.

Answer:

1. a) Input - prices; Example: A decrease in the price of rubber (input for tire production) makes tire producers more willing to supply tires at each price.

b) Technology; Example: New 3 - D printing technology allows producers to make custom - designed products more easily and supply more at each price.

1. a) 6; 30

b) Surplus; 50
c) Shortage; 25
5.

EVENT	DEMAND DETERMINANT	SUPPLY DETERMINANT
People increase their concern for the environment.	X
An economic boom raises people's wealth.	X
A strike by aluminum workers raises the price of aluminum.		X
The price of gas - powered cars falls.	X