Foundations of Macroeconomics Chapter 4 solutions quiz

Mar 29th, 2015
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Multiple Choice Quiz 1. Which of the following events illustrates the law of demand: Other things remaining the same, a rise in the price of a good will ________ . A. decrease the quantity demanded of that good B. increase the demand for a substitute of that good C. decrease the demand for the good D. increase the demand for a complement of that good Answer: A The law of demand is the inverse relationship between the price of a good and the quantity demanded. 2. In the market for jeans, which of the following events increases the de-mand for a pair of jeans? A. rise in the wage rate paid to garment workers B. rise in the price of a denim skirt (a substitute for jeans) C. fall in the price of denim cloth D. new technology, which reduces the time it takes to make a pair of jeans Answer: B The other factors listed change the supply; only answer B in-creases the demand. 3. Other things remaining the same, a fall in the price of peanuts will ________. A. increase the supply of peanuts B. decr

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Demandand SupplyChapter4ANSWERS TO CHAPTER CHECKPOINTS?Study Plan Problems and Applications1.Explain how each of the following events changes the demand for or supply of air travel.Airfares tumble, while long-distance bus fares don't change.A change in the price of airfares does not change either the demand for or the supply of air travel. (It changes the quantity demanded and the quantity supplied of air travel.) The price of jet fuel rises.The rise in the price of jet fuel decreases the supply of air travel because it raises the cost of producing air travel.Airlines reduce the number of flights each day.The reduction in the number of flights decreases the supply of air travel.People expect airfares to increase next summer.The current demand for air travel increases when people expect airfares to increase next summer because people fly now, when airfares are relatively cheaper, rather than next summer.The price of train travel falls.Train travel is a substitute for air travel. So a fall in the price of train travel decreases the demand for air travel.The price of a pound of air cargo increases.Transporting cargo by air is a substitute in production for transporting people by air. So the rise in the price of air cargo decreases the supply of air travel for people.Use the laws of demand and supply to explain whether the statements in Problems 2 and 3 are true or false. In your explanation, distinguish between a change in demand and a change in t

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