1.

Explain the difference between a change in quantity demanded and a change in demand. What variable(s) must change for there to be a change in quantity demanded? What variables(s) must change for there to be a change in demand?

Questions 2-5 give scenarios will shift demand in the market for cable television in a particular city. Briefly answer the following questions for each scenario.

(a) Which of the demand shifter variables (PYNTE) is affected?

(b) Will demand increase or decrease as a result of the change?

(c) Which way does the demand curve shift (right or left)?

(d) Assuming supply remains the same, what happens to equilibrium price and quantity after the shift? Will they increase or decrease?

2.

A booming economy increases the income of consumers.

3.

The cable company becomes known for poor customer service.

4.

The price of satellite television service decreases.

5.

A large number of people move into the city.

Questions 6-9 give scenarios will shift supply in the market for gas-powered automobiles. Briefly answer the following questions for each scenario.

(a) Which of the supply shifter variables (SPENT) is affected?

(b) Will supply increase or decrease as a result of the change?

(c) Which way does the supply curve shift (right or left)?

(d) Assuming demand remains the same, what happens to equilibrium price and quantity after the shift? Will they increase or decrease?

6.

A new machine makes producing cars quicker and easier.

7.

Congress passes a law which requires car manufacturers to reduce emissions during the manufacturing process.

8.

A large firm goes bankrupt and closes.

9.

Car manufacturers expect the price of cars to fall next month.

10.

What is meant by a "binding price floor?" Give an example and explain how a binding price floor affects the market equilibrium.