Supply and Demand Questions - Winthrop University



Supply and Demand Questions Dr. Pantuosco

Macroeconomic Applications ECON 216

We are looking at the market for goods and services in the U.S. On the P axis we measure the price of goods and services in general. Are prices going to go up or are they going to go down? On the X axis we are measuring the amount sold in our economy. Is the amount sold going to increase or decrease?

We start in an equilibrium position. Then a change occurs. Explain how the change will affect prices and the amount sold; then state whether the change caused a shift in the U.S. supply curve or the U.S. demand curve, left or right.

Draw a graph for each question. Explain the change in demand or supply.

1. American productivity increases.

2. American union workers join together and negotiate for more lucrative compensation packages (higher wages and benefits).

3. Technological improvements.

4. The U.S. government increases the taxes on businesses.

5. U.S. stock prices rise.

6. U.S. housing prices fall.

7. U.S. interest rates fall.

8. Oil prices rise.

9. Government offers rebates for first-time home owners.

10. Government offers rebates on cash for clunkers.

11. U.S. opens trade with Central America.

Exam type questions:

1. In the market for housing, an increase in interest rates will cause

a. The demand to increase c. The supply to increase

b. The demand to decrease d. The quantity supplied to increase

2. In the market for housing, a more strict government policy on lending would cause

a. The demand to increase c. The supply to increase

b. The demand to decrease d. The quantity supplied to increase

3. In the market for housing, the American Dream Downpayment Act was passed in 2003 to inspire banks to make loans to lower income customers to encourage all Americans to purchase a home. In the market for housing this caused

a. The demand to increase c. The supply to decrease

b. The demand to decrease d. The quantity demanded to increase

4. In the market for health care, the government subsidizes medical services for low income patients, this causes

a. The demand to increase c. The supply to decrease

b. The demand to decrease d. The quantity supplied to decrease

5. In Singapore, patients have to pay their entire medical bill with their own money from their medical savings account. In the market for health care services this causes

a. The demand to increase c. The supply to decrease

b. The demand to decrease d. The quantity supplied to decrease

6. In the market for health care services, the cost of technology increases. This causes

a. The demand to increase c. The supply to decrease

b. The demand to decrease d. The quantity supplied to decrease

7. When the cost of technology increases, the price of health care services ______ and the quantity of health care services __________.

a. increase, decrease b. decrease, decrease

c. increase, increase d. decrease, increase

8. In the market for oil, the Chinese economy is falling into recession. This causes the price of oil to _____ and the quantity sold of oil to _____.

a. increase, decrease b. decrease, decrease

c. increase, increase d. decrease, increase

9. In the market for fast food, the minimum wages for workers rises to $15 per hour, holding everything else constant, the

a. demand shifts right b. demand shifts left

c. supply shifts right d. supply shifts left

10. As a result of the minimum wage increase, prices of fast food ____ and quantity sold of fast food ______.

a. increase, decrease b. decrease, decrease

c. increase, increase d. decrease, increase

11. Which of the below is not true. If the government support building high speed rail system

a. taxes will increase b. airline travel will increase

c. employment will increase d. the government deficit will increase

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