Assume the market for 2-bedroom apartments in San Diego is in equilibrium at a rental rate of $1200/month. At this price, there are 80,000 apartments rented. Because of an increase in foreclosures, more people are looking for apartments. How does this affect market supply and/or demand for apartments?
A) Demand shifts left
B) Demand shifts right
C) Supply shifts left
D) Supply shifts right
E) Neither curve shifts, it is a movement along the demand curve
If the price for two-bedroom apartments remains at $1200, there will be a:
C) shift in demand
D) shift in supply
NOTE: In the next set of questions, the first question asks students to draw the supply and demand graph, which they must use in the follow-up clicker question. See Hoyt, et al, 2012 for discussion of this approach.
Assume that a year ago, the market for handyman services was in equilibrium at a price of $40/hour. At that price, 1000 hours were bought and sold each month. But with the declining economy, more people are choosing to fix things themselves. Draw the supply and demand diagram for handyman services and show the effect of the declining economy on the market.
The declining economy will lead to ______ prices and _____ quantity in the market for handyman services.
A) Higher, higher
B) Lower, lower
C) Higher, lower
D) Lower, higher
One industry that is affected by changes in the price of crude oil is airlines. Use a supply and demand diagram of the market for air travel to show the effect of an increase in fuel prices on equilibrium price and quantity of airline tickets (label original equilibrium P*, Q*).
Based on your graph, what is the effect of increasing fuel prices on the market for airline tickets?
A) Price will fall, Quantity will fall
B) Price will rise, Quantity will rise
C) Price will rise, Quantity will fall
D) Price will fall, Quantity will rise
One observes that the equilibrium price of t-shirts increases and the equilibrium quantity falls. Which of the following explanations best fit with these observations?
A) An increase in demand, no change in supply
B) A decrease in supply, no change in demand
C) An increase in demand and an increase in supply
D) An increase in supply and a decrease in demand
Which of the following would unambiguously cause an increase in the equilibrium price of cotton shirts?
A) An increase in the price of wool shirts and a decrease in the price of raw cotton
B) A decrease in the price of wool shirts and a decrease in the price of raw cotton
C) An increase in the price of wool shirts and an increase in the price of raw cotton
D) A decrease in the price of wool shirts and an increase in the price of raw cotton