Microeconomics Chapter on Market Equilibrium

Questions and Answers

Are markets always in equilibrium?

False

If the demand for software engineers slower than does supply, then wages of software engineers will .

increases; fall

A straightforward example of a _______________, often used for simplicity, is the interest rate.

rate of return

If the price of butter rises, then in the market for margarine, what happens?

Both the equilibrium price and quantity will rise. Signup and view all the answers

When consumers and businesses have greater confidence that they will be able to repay in the future, what happens?

The quantity demanded of financial capital at any given interest rate will shift to the right. Signup and view all the answers

Whenever there is a shortage at a particular price, the quantity sold at that price will equal what?

The quantity supplied at that price. Signup and view all the answers

The labor curve(s) will shift ___ if there is an increase in productivity or an increase in the demand for the final product.

demand; right Signup and view all the answers

What will be the likely effect of increasing the minimum wage in Ontario from $8.75 to $9.50 during a recession?

Both the leftward shift in the labor demand curve and the higher minimum wage will lead to an increase in the unemployment rate. Signup and view all the answers

As the __________ substitute for low-skill labor becomes available, the demand curve for low-skill labor will shift to the left.

technology Signup and view all the answers

If D1 and S1 represent the demand and supply schedules in a particular market, then the equilibrium price and quantity are and , respectively.

Signup and view all the answers

What results in a rightward shift of the market demand curve for labor?

An increase in demand for the firm's product. Signup and view all the answers

The United States has approximately ___________ credit card holders.

180 million Signup and view all the answers

What is the likely economic effect of steel mill wage costs increasing by 18 percent over a year?

There is an increase in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel. Signup and view all the answers

Improvements in the productivity of labor will tend to what?

Increase wages. Signup and view all the answers

If the demand schedule changes from D1 to D2, what happens to the equilibrium price?

Equilibrium price increases from $6 to $8. Signup and view all the answers

If the demand schedule changes from D2 to D1, what happens to the equilibrium quantity?

Equilibrium quantity decreases from 15 to 13. Signup and view all the answers

If the government imposes a price ceiling of $4, what happens?

A 10 unit shortage will result. Signup and view all the answers

The 'law of supply' functions in labor markets; that is, a higher __________ for labor leads to a higher quantity of labor supplied.

price Signup and view all the answers

The movement from to is consistent with a decrease in the price of cotton (a substitute).

Signup and view all the answers

Which of the following will not result in a rightward shift of the market supply curve for labor?

An increase in labor productivity. Signup and view all the answers

Study Notes

Market Equilibrium

Markets typically move toward equilibrium in the absence of outside interference.
Not all markets are always in equilibrium; fluctuations are common.

Wages and Supply/Demand

If demand for software engineers grows slower than supply, wages will decrease.
The labor demand curve shifts rightward with increased productivity or higher product demand.

Substitutes and Market Effects

In markets with substitutes, like butter and margarine, a price increase in one leads to higher equilibrium prices and quantities in the other.

Financial Capital Demand

Increased consumer and business confidence causes the quantity demanded for financial capital to shift right at any given interest rate.

Shortages in Pricing

In the presence of a shortage, the quantity sold at a specific price matches the quantity supplied at that price.

Impact of Minimum Wage

Raising the minimum wage during a recession can lead to increased unemployment due to leftward shifts in the labor demand curve.

Technology and Labor Demand

Availability of technology as a substitute reduces the demand for low-skill labor, shifting the demand curve leftward.

Credit Card Statistics

Approximately 180 million credit card holders exist in the United States.

Cost Increases in Production

An 18% rise in wage costs for steel mills likely leads to higher steel prices due to a leftward supply curve shift.

Labor Productivity

Improved productivity generally raises wages across the labor market.

Changes in Demand and Equilibrium

A shift in the demand schedule from D1 to D2 results in an increase in equilibrium price from $6 to $8.
A reverse shift from D2 to D1 decreases equilibrium quantity from 15 to 13.

Price Ceilings and Shortages

Imposing a price ceiling at $4 when demand is at D1 and supply at S2 leads to a 10-unit shortage.

Labor Supply Relationship

The law of supply applies to labor markets, indicating that a higher price for labor increases the quantity supplied.

Market Supply Curve Shifts

An increase in labor productivity does not contribute to a rightward shift in the market supply curve for labor.

Demand Curve Shifts

Rightward shifts in the market demand curve for labor occur with increased demand for a firm's products.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Description

This quiz covers essential concepts of microeconomics, focusing on market equilibrium, supply and demand dynamics, and the impact of factors like wages and pricing. Understand how shifts in curves and consumer confidence affect market outcomes, as well as the implications of minimum wage policies.