Exam 3: Demand and Supply 

The substitution effect helps to explain why the demand curve slopes down.

What is on the vertical axis when we plot a demand curve?

When the price of a good increases, consumers experience an increase in their purchasing power.

Together, the _________ _________ effect and the _________ effect account for the downward slope of the demand curve.

Which one of the following statements is FALSE?

At the equilibrium price, there is no surplus and no shortage.

If bagels and cream cheese are complement goods, then a decrease in bagel prices will

Consumers substitute between goods in response to changes in their _________ prices.

The market demand curve is the vertical summation of the demand curves of all the individuals in the market.

Inflation is a condition in which all real incomes are rising.

The positive slope of the supply curve tells us that

Suppose that the price of cornflakes increases while the price of other cereals remains the same. What effect does this have on the market for cornflakes?

During the war against Iraq, many Americans stopped buying French wine to protest the lack of French support for the U.S. How did this affect the market for French wine?

There is an increase in the quantity of cream demanded when the price of coffee falls. Other things constant, we can conclude that coffee and cream are

The supply curve shifts when the firm experiences a change in its production technology.

Table 3.2 -What is the equilibrium quantity in the market described in Table 3.2?

Which of the following is NOT a determinant of consumer demand?

Assume that beef and chicken are substitutes. Given a downward-sloping demand curve for beef, a fall in beef prices will result in

As more firms enter an industry, the industry supply curve shifts left.

What condition defines a shortage?