1. Suppose the following events occur in the market for new houses. For each individual event, show graphically how the supply and demand model is affected and explain any shifts/movements along the curves.

i. The cost of lumber decreases.

ii. Consumer incomes increase.

iii. The cost of labor increases.

iv. The price of apartments decrease.

2. Which of the following would not shift the supply of a good?

a) A change in the price of the good

b) A change in input costs

c) A change in production technology

d) A change in taxes on sellers

3. Suppose the price of oranges has decreased dramatically. All else equal, what would happen to the equilibrium price and quantity of apples (a substitute)?

a) Price will decrease, quantity will increase

b) Price will decrease, quantity will decrease

c) Price will increase, quantity will increase

d) Price will increase, quantity will decrease

4. Suppose the cost of wood increases dramatically. Which of the following would occur in the market for new houses?

a) Equilibrium price will decrease

b) Quantity demanded will decrease

c) Supply will increase

d) Demand will decrease

5. Which of the following will shift a good's demand curve?

a) A change in the technology used in producing the good

b) A change in the cost of materials used to make the good

c) A change in the price of the good

d) A change in per unit taxes on sellers

e) None of the above

6. Assume pancakes and syrup are complementary goods. If the price of syrup increased, all else equal, what would happen in the market for pancakes?

a) An increase in demand and increase in quantity supplied

b) A decrease in demand and a decrease in quantity supplied

c) An increase in supply and an increase in quantity demanded

d) A decrease in supply and a decrease in quantity demanded

7. Which of the following would not cause a shift in demand?

a) A change in incomes

b) A change in the price of related goods

c) A change in the price of the good

d) A change in consumer tastes

e) All of the above shift demand

8. Suppose new cost-decreasing technology is developed for the production of bread. Which of the following would occur in the market for bread?

a) A decrease in supply

b) An increase in demand

c) Excess demand at the original price

d) An increase in quantity demanded

e) A decrease in demand

9. In an effort to raise money for education spending, suppose the government put a $0.50 tax on notebook paper. All else equal, what would happen to the equilibrium price and quantity of notebook paper?

a) Price would increase, quantity would increase

b) Price would increase, quantity would decrease

c) Price would decrease, quantity would increase

d) Price would decrease, quantity would decrease

10. Assume pancakes and syrup are complementary goods. If the price of syrup increased, all else equal, what would happen to the equilibrium price and quantity of pancakes?

a) Price would increase, quantity would increase

b) Price would increase, quantity would decrease

c) Price would decrease, quantity would increase

d) Price would decrease, quantity would decrease

11. In a recent newspaper article it was stated that a drought in South America is causing a sharp increase in the world's coffee prices. Assuming coffee and tea are substitutes, which of the following would occur in the market for tea?

a) A decrease in demand

b) An increase in supply

c) Excess demand at the original price

d) An decrease in quantity supplied

e) A decrease in supply