Demand and supply: Applications and extensions.

Demand and supply are two of the most basic concepts in economics that describe the interactions between buyers and sellers in a market. These concepts have a wide range of applications and extensions, some of which include:

  1. Market equilibrium: The point at which the quantity demanded of a good or service equals the quantity supplied is called market equilibrium. At this point, the price of the good or service is stable and there is no surplus or shortage. Market equilibrium is an important concept in understanding how markets function and how prices are determined.
  2. Elasticity: Elasticity is a measure of how responsive the quantity demanded or supplied is to changes in price. It helps to understand how changes in price will affect the quantity demanded or supplied, and ultimately the market equilibrium.
  3. Market failure: Market failure occurs when the market is not able to allocate resources efficiently. This can happen due to externalities, public goods, and market power. Understanding how demand and supply interact in these situations is crucial in identifying and addressing market failure.
  4. Government intervention: Governments often intervene in markets to correct the market failure or achieve other policy objectives. Understanding how demand and supply interact in a market is crucial in evaluating the effectiveness of these interventions.
  5. International trade: International trade is the exchange of goods and services between countries. The theory of comparative advantage is based on the concept of demand and supply. It suggests that countries should specialize in producing goods and services for which they have a comparative advantage and trade for goods and services for which they have a comparative disadvantage.
  6. Behavioral economics: This field of economics uses the principles of psychology to understand how people make decisions. Behavioral economics has extended the classical model of demand and supply by including factors such as emotions, social norms, and cognitive biases.

In conclusion, demand and supply are fundamental concepts in economics that have a wide range of applications and extensions. These concepts are used to understand how markets function, how prices are determined, and how to address market failure. They are also used to evaluate the effectiveness of government interventions, understand international trade, and incorporate behavioral factors in decision-making.

1.Government-imposed rent controls that reduce the price of rental housing below equilibrium lead to:
2.Which of the following happens because of the imposition of a price ceiling in a market?
3.Which of the following is NOT generally involved in the production process in a market economy?
4.Assume the demand for apples is highly inelastic, while the supply is highly elastic. If the government statutorily imposes a $2 tax per apple on sellers, the:
5.The additional tax liability a person faces divided by his or her additional taxable income is known as:
6.Which of the following would be expected to occur if a new subsidy is granted to students taking classes at culinary (cooking) schools?
7.Which of the following is true of government subsidy programs in the United States?
8.Identify the correct statement about a black market.
9.The curve illustrating the relationship between tax rates and the level of tax revenue is called:
10.Which of the following would result from a government-imposed price ceiling that lowered the price of gasoline below its market equilibrium level (such as the one imposed in the 1970s)?
11.Buyers bear the larger share of the tax burden when:
12.Which of the following is true of a resource market?
13.Which of the following would increase the supply of a good or service?
14.Suppose the Laffer curve for the United States bends backward above the revenue-maximizing marginal tax rate of 20 percent. If the existing marginal tax rate in the United States is 30 percent, which of the following steps would result in an increase in tax revenue?
15.Which of the following will happen if the price of flour increased from $2 per pound to $3.50 per pound?
16.Supposed that Jade has a tax liability of $30,000 when her taxable income is $100,000, and her tax liability rises to $48,000 when her taxable income rises to $120,000. Which of the following is true?
17.A subsidy is
18.In economics, the term tax incidence refers to:
19.Which of the following describes the importance of the legal structure in the operational efficiency of a market system?
20.The deadweight loss resulting from a tax is a result of:
21.If lowering the per unit tax on widgets from $25 to $20 results in the number of widgets sold rising from 100 to 150, then
22.Suppose a $500 tax is imposed statutorily on the sellers. In the supply and demand framework this would be illustrated by:
23.Which of the following is a difference between black markets and normal legal markets?
24.According to the Laffer curve:
25.Which of the following will result from the government imposition of a price floor or price ceiling?
26.When Erin’s taxable income is $60,000, she has a $20,000 tax liability. When her taxable income rises to $100,000 her tax liability increases to $25,000. Which of the following is true?
27.Which of the following is true of the relationship between resource prices and product prices?
28.A subsidy on a good will lead to a greater benefit:
29.Which of the following is a result of an increase in the price of a resource?
30.Suppose a tax is imposed statutorily on the buyers of a good that has the usual upward sloping supply curve and downward sloping demand curve. The actual burden of the tax will:
31.Which of the following is a reason for people engaging in black market transactions?
32.Which of the following do rent controls (government-imposed price ceilings on rental housing) lead to?
33.Which of the following is essential for the efficient operation of markets?
34.Tax revenue equals:
35.The distribution of the actual benefit of a subsidy between buyer and seller depends on:
36.Combined state and federal taxes on gasoline average around 50 cents per gallon, and these taxes are statutorily levied on gasoline sellers. Because the demand for gasoline is relatively inelastic compared to the supply of gasoline:
37.Which of the following is true of a government-mandated minimum wage?
38.A progressive tax is one in which:
39.Which of the following is true of price controls?
40.Jason’s tax liability is $2,880 on an income of $18,000. His average tax rate would be:
41.According to the Laffer curve:
42.Which of the following is true regarding the interrelationship between the market for laptop computers and the market for aluminum, a resource used to make laptop computers?
43.An increase in the demand for cars will lead to:
44.A condition in which a government-imposed price ceiling causes the amount of a good offered for sale by producers to be less than the amount demanded by buyers is known as a:
45.The actual incidence or burden of a tax will fall primarily on sellers when:
46.The excess burden, or deadweight loss, of taxation reflects:

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