1.Which of the following is consistent with the law of supply?
a.As the price of calculators rises, the supply of calculators increases, ceteris paribus.
b.As the price of calculators falls, the supply of calculators increases, ceteris paribus.
c.As the price of calculators rises, the quantity supplied of calculators increases, ceteris paribus.
d.As the price of calculators rises, the quantity supplied of calculators decreases, ceteris paribus.
2. DVDs and DVD Players are complements. An increase in the price of DVD Players would cause which of the following in the market for DVDs?
a.The equilibrium price and quantity of DVDs would increase.
b.The equilibrium price and quantity of DVDs would decrease.
c.The equilibrium price of DVDs would increase and the equilibrium quantity would decrease.
d.The equilibrium price of DVDs would decrease and the equilibrium quantity would increase.
Look close as the definition from the Business Dictionary:
law of supply and demand
Definition
Common sense principle which defines the generally observed relationship between demand, supply, and prices: as demand increases the price goes up which attracts new suppliers who increase the supply bringing the price back to normal. However, in the marketing, of high price (prestige) goods, such as perfumes, jewelry, watches, cars, liquor, a low price may be associated with low quality, and may reduce demand.
Sra
1. The answer is c. As the price of calculators rises, the quantity supplied of calculators increases, ceteris paribus. The law of supply states that there is a direct relationship between price and quantity supplied. When the price of a good rises (ceteris paribus, or holding all other factors constant), producers are more willing and able to supply a larger quantity of that good.
2. The answer is c. An increase in the price of DVD Players, which are complements to DVDs, would cause the equilibrium price of DVDs to increase and the equilibrium quantity to decrease. Complementary goods are goods that are typically consumed together, so when the price of one good increases (in this case, DVD Players), it reduces the demand for the complementary good (DVDs), leading to a decrease in both quantity and equilibrium quantity.
1. The correct answer is c. As the price of calculators rises, the quantity supplied of calculators increases, ceteris paribus. The law of supply states that there is a positive relationship between price and quantity supplied, assuming all other factors remain constant (ceteris paribus). When the price of calculators increases, it provides an incentive for suppliers to produce and supply more calculators to the market.
To arrive at this answer, you need to understand the concept of the law of supply. The law of supply tells us that as the price of a good or service increases, suppliers have a greater incentive to produce and sell more of it. This is because higher prices mean higher profits for suppliers. Similarly, when prices fall, suppliers have less incentive to produce and sell the good or service, leading to a decrease in the quantity supplied. By considering this principle, you can deduce that as the price of calculators rises, the quantity supplied of calculators will increase.
2. The correct answer is c. The equilibrium price of DVDs would increase and the equilibrium quantity would decrease. DVDs and DVD players are complementary goods, meaning they are consumed together. When the price of DVD players increases, it reduces the demand for DVDs because DVD players become relatively more expensive compared to their complementary good. Consequently, the decrease in demand for DVDs results in a decrease in both the equilibrium price and quantity of DVDs in the market.
To arrive at this answer, you need to understand the relationship between complements and prices. Complementary goods are often consumed together, meaning an increase in the price of one complementary good leads to a decrease in the demand for the other complementary good. In this case, an increase in the price of DVD players reduces the demand for DVDs, resulting in a decrease in both price and quantity. Therefore, the correct answer is that the equilibrium price of DVDs would increase and the equilibrium quantity would decrease.