Questions for economic reasoning and discussion

1. From the following data, plot the supply and demand curves and determine the equilibrium price and quantity.

Supply of Pizzas and Demand for Pizzas
Price	Quantity demanded	Quantity supplied
10	0	40
8	10	30
6	20	20
4	30	10
2	40	2
1	100	0

1. What would happen if the demand for pizzas tripled at each price?

2. What would occur if the price were initially set at 4 hryvnyas?

3. How can basic supply-and-demand models be used to explain such concepts as shortage and surplus?

4. How do supply and demand interact to determine the market price of a good or service?

5. Why do market prices and quantities change in response to changes in market conditions?

2. "When the forces of supply and demand are at work in a market economy, the equilibrium price is the only one that matters. All other prices are irrelevant (недоречні)." Explain this statement.

3. Explain why price and quantity move to the equilibrium price and the equilibrium quantity in a market economy.

4. Explain why each of the following is false:

1. A freeze in Brazil’s coffee-growing region will lower the price of coffee.

2. The high price of oil resulting from political disturbances in the Middle East will lower the demand for oil.

3. Concerns about the health effects of meat will lower the price of butter and raise the price of leather jackets.

5. Choose the right variant. Only one is possible.

1. “Prices act as signals to the market.” This means that

1. prices affect the kinds and amounts of goods and services offered for sale.

2. profits increase as prices rise.

3. high prices signal a healthy economy.

4. people wait for supply and demand schedules to be published before making decisions.

2. In a market economy, prices serve as …, provide …, and affect the …

1. signals, incentive, distribution of income

2. distribution of income, signals, incentive

3. signals, distribution of income, incentive

4. incentive, signals, distribution of income

3. In a simple model of the supply and demand for pizza, when the price of cheese increases, the price of pizza … and the quantity demanded ….

1. increases; increases

2. decreases; increases

3. decreases; decreases

4. increases; decreases

3. In a competitive market, the equilibrium or market price is

1. determined by consumer decisions.

2. the lowest price producers can charge and still make a profit.

3. determined by a government agency.

4. the price at which consumers will buy all the goods producers are willing to sell.

3. What will happen in a competitive market if the quantity supplied exceeds the quantity demanded?

1. Consumers will demand more goods.

2. Suppliers will increase their output of goods.

3. The market price will go down.

4. The market price will go up.

3. When an item becomes scarce, its price rises and, as a result, fewer people buy it. This statement illustrates

1. the rationing effect of prices.

2. the production-motivating effect of prices.

3. the law of supply.

4. the effect of a shift in demand.

3. There is a price elasticity of demand for frozen orange juice. If there is a severe frost which destroys large quantities of oranges we expect to see

1. No change in the market price and no change in spending

2. A rise in the market price and a fall in spending on orange juice

3. An increase in the market price and no change in spending

4. A fall in the market price and a rise in spending on orange juice

19