Demand, Supply and Equilibrium (Chapter 4)

This assignment is associated with the learning outcome relative to the law of supply.

Go to chapter 4 in your textbook and read Application 2 Law of Supply and Woolympics: Applying the Concepts #2: What is law of supply?

Recall the Application about the decrease in the price of wool in the 1990s to answer the following question(s). In the 1990s, the world price of wool decreased by about 30 percent and prices have remained relatively low since then. In 2012, an organization in New Zealand proposed that sheep shearing be added to the Commonwealth Games and the Olympics as a spectator sport in an effort to increase the awareness and the demand for wool.

1. Recall the Application. As the world price of wool decreased, the quantity of wool supplied by individual ranchers would ________, and the quantity supplied in the whole market would ________.

A) increase; increase

B) increase; decrease

C) decrease; decrease

D) decrease; increase

2. Recall the Application. The decrease in the price of wool would be reflected by a movement ________ on the market supply curve for wool.

A) down and to the right

B) down and to the left

C) up and to the right

D) up and to the left

3. Recall the Application. If the organization in New Zealand was successful in getting the Olympics to include sheep shearing as a spectator sport, and this helped to raise the world price of wool, the quantity of wool supplied would ________ because the market supply curve for wool is ________ sloped.

A) increase; positively

B) increase; negatively

C) decrease; positively

D) decrease; negatively

4. As the price of a product rises, the quantity supplied decreases.

A) True

B) False

5. On the "supply side" of a market, producers indicate to consumers what they are willing to sell, in what quantity and at what price.

A) True

B) False