E2105 CPA Ch4 F PDF

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This is information about macroeconomics in the form of questions and answers. I hope this will be a big help....

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E2105 CPA Ch 4 Name: Kamryn Carr Relevant readings: Mankiw Ch. 4 1. What is a competitive market? Briefly describe a type of market that is not perfectly competitive. A competitive market is described as a market in which there are so many buyers and so many sellers that each has a negligible impact on the market price. The catering business is not perfectly competitive. It is monopolistic competition since they all have differentiating products. 2. What is the demand curve? Why does the demand curve slope downward? List the things that can cause demand to shift. How do we interpret a shift? The demand curve is the line related to price and quantity. The demand curve is sloping downward because the lower the demand the greater quantity demanded. The things that income, prices of related goods, tastes, expectations, and # of buyers. The shift show what will happen to the quantity demanded when the prices changes. 3. When your income increases you buy more steak. Is steak a normal good or an inferior good? When your income increases you buy less ramen noodles. Are they normal or inferior? What qualities do inferior goods usually have? Steak would be considered to be a normal good. Ramen noodles is considered an inferior good. When a demand for a good rises and income rises. 4. What is the supply curve? Why does the supply curve slope upward? List the things that can cause supply to shift. How do we interpret a shift? A supply curve is the relationship between the price of a good and the quantity supplied. The supply curve slopes upward because a higher price means greater quantity supplied. The things that can shift the supply curve is input prices, technology, expectations and # of sellers. The shift shows how total quantity supplied varies as the price of the good varies. 5. If the current price is higher than the equilibrium, why would the price have to come down? The quantity supplied is greater than quantity demanded. The price would have to come down because it would create a surplus and surplus drives prices down.

6. Are tea and coffee generally complements or substitutes? When the price of coffee rises, what happens in the market for tea? Illustrate what happens in the market for tea (you can scan a drawing or take a high quality photo of it).

Tea and coffee are usually substitutes. When the price of coffee rise, the demand for tea will go up.

7. How are prices useful in allocating resources? Prices are the mechanism for rationing scarce resources in the market economy. Prices also decides who makes what and how is made. There is no type of government intervention in deciding this and makes sure there just the right amount of supplies. 8. 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. “We find out that eating fish is good for you: the price of tuna rises.” c. “When a war breaks out in the Middle East, the price of gasoline rises, and the price of a used Cadillac falls.”...