Econ151_Chp_3_Auto

Question 1.1: To draw the demand curve, the price for using public transportation must be held constant. If the cost of riding the bus declines, which of the following statements are true? Select all correct statement ...

Question 1.1: To draw the demand curve, the price for using public transportation must be held constant. If the cost of riding the bus declines, which of the following statements are true? Select all correct statements. The commuter’s demand curve for gasoline may change. The ceteris paribus assumption is violated. The commuter may ride the bus more and consume less gasoline. The demand curve will become upward sloping. Question 1.2: As the price of gasoline decreases, the quantity demanded of gasoline Increases Question 1.3: What is the total quantity demanded at $3.00 per gallon? 125 175 50 Question 1.4: What is the total quantity demanded at $4.00 per gallon? 100 40 140 Question 1.5: Which arrow on the graph shows a change in Quantity Demanded? A B Both The distinction between a change in demand and a change in the quantity demanded is an important one. A change in the quantity demanded of a good is caused by a change in the price of the good, therefore, “all else equal” creates a ceteris paribus condition. As such, a change in the quantity demanded of a good is represented by a movement along the demand curve. This is in contrast to a change in demand which is caused by a change in anything that affects demand other than the price (e.g. income or the price of a related good changes). This occurs when the ceteris paribus assumption does not hold and the demand curve shifts to a new position. Question 1.6: Which arrow on the graph shows a change in Demand? A B Both Question 1.7: For Emma, gasoline is an inferior good because as her income increases she purchases a house closer to her work’s downtown office and thus has a shorter commute. Emma receives a large raise at work. By dragging the demand curve left or right or selecting the quantity demanded, show the effect that this event will have on Emma’s demand for gasoline. The demand curve shifts left. Question 1.8: When people retire from work they, on average, drive less because they do not have a daily commute. In the United States, according to the Current Population Survey, from 2003 to 2012 the proportion of the population over 65 increased from 12% to 13.4%. By dragging the demand curve left or right or selecting the quantity demanded, show the effect that this event will have on the market for gasoline. The demand curve shifts left. Question 1.9: Gasoline and electric cars are substitute goods . By dragging the demand curve left or right or selecting the quantity demanded, show the effect that a government subsidy that lowers the price of electric vehicles would have on the demand for gasoline. The demand curve shifts left. Question 1.10: Following the terrorist attacks of September 11th, 2001, citizens of the United States were hesitant to travel by airplane. As a result, Americans who would have previously flown began driving more often. By dragging the demand curve left or right or selecting the quantity demanded, show the effect that this event will have on the market for gasoline. The demand curve shifts right. Question 1.11: Gasoline prices over the past few weeks have fallen. By dragging the demand curve left or right or selecting the quantity demanded, show the effect that this event will have on the market for gasoline. The quantity demanded increases Question 2.1: To draw the supply curve, the number of refineries must be held constant. If a hurricane in the Gulf Coast forces the refineries at Galveston and Shreveport to suspend operations, which of the following statements are true? Select all correct answers. The firm’s supply curve for gasoline will change. The ceteris paribus assumption is violated. The firm will supply less gasoline at all prices. The firm’s supply curve will become downward sloping. The ceteris paribus assumption is violated. The supply curve will move to a different place. The quantity of gasoline supplied at each price will change. Question 2.2: As the price of gasoline increases, the quantity supplied of gasoline by the Gulf Coast Refining Company increases. Question 2.3: What is the total quantity supplied at $3.00 per gallon? 100 300 200 Question 2.4: What is the total quantity supplied at $4.00 per gallon? 300 450 150 Question 2.5: Which arrow on the graph shows a change in Quantity Supplied?