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Supply, Market, Demand, Breakfast Cereal, Market, Principles of Macroeconomics Homework

The key terms in this Principles of Macroeconomics course include Supply, Market, Demand, Breakfast Cereal, Equilibrium, supply curve, demand curve, Increase, normal good, inferior good, Principles of Macroeconomics, Homework


The market for breakfast cereal is currently in equilibrium.  Suddenly there is a storm that destroys the wheat that farmers had been growing for the cereal manufacturer.  What will happen to the cereal market after the storm?

Supply will increase.

Supply will decrease.

Demand will increase.

Demand will decrease.

Explanation:

A storm that destroyed the wheat crops would cause the price of that grain to rise. Given that grains are an important input in the manufacture of cereal, the rise in the price of grain represents an increase in input prices for cereal. This is represented in the cereal market as a leftward shift of the supply curve and no change in the demand curve.


There are a number goods that over time, for a variety of reasons, transition from being a normal good to an inferior good or from being an inferior good to a normal good. One such example of a good is the Toyota Camry. In the 1980s,more income for a household usually resulted in more Camrys being purchased. However, today more Toyota Camrys are purchased by households that have experienced a reduction in income. 

How could this happen?

The Camry becomes a normal good because the good is now perceived as lower in quality than a Lexus.

Households have already purchased enough Camrys so income has little impact.

The Camry becomes an inferior good because the good is now perceived as lower in quality than a Lexus.

The Camry becomes an inferior good because as consumers receive more purchasing power, they purchase more of the product.

Explanation:

A normal good like a Camry can become an inferior good if it is perceived to be a lower quality good. What causes a person with more income to buy less of a product?


Which of the following will cause an increase in the supply of yogurt?

An increase in the costs of producing yogurt

An increase in tax on the sale of yogurt

An increase in the price of yogurt

An increase in the number of sellers in the market for yogurt

Explanation:

An increase in the supply is shown as a rightward shift of the supply curve. An increase in the number of sellers will lead to an increase in market production, and as a result, will shift the supply curve to the right.