Deck 3: Demand,supply,and Price

Question 1

Suppose we observe that movie theatre prices are less during the daytime than in the evening.If the supply of movies does not change between daytime and evening,then the most likely explanation for this difference in price is

A)the evening supply curve is to the right of the daytime supply curve.
B)the evening demand curve is to the right of the daytime demand curve.
C)the evening supply curve is to the left of the daytime supply curve.
D)the evening demand curve is to the left of the daytime demand curve.

Answer 1

B

Question 2

If there is no change in the money price of steel during a period of 6% inflation,then the

A)absolute price of steel has decreased.
B)relative price of steel has decreased.
C)relative price of steel is equal to the absolute price of steel.
D)absolute price of steel has increased.
E)relative price of steel has increased.

Answer 2

B

Question 3

A fall in the price of raw milk (which is used in the production of ice cream)will

A)have no effect on the supply curve of ice cream but cause a downward movement along the supply curve of ice cream.
B)decrease the supply of ice cream,causing the supply curve of ice cream to shift to the left.
C)increase the supply of ice cream,causing the supply curve to shift to the left.
D)increase the supply of ice cream,causing the supply curve of ice cream to shift to the right.
E)decrease the supply of ice cream,causing the supply curve to shift to the right.

Answer 3

D

Question 4

When deriving the market demand curve for a commodity,the only variable(s)that can change is (are)the

A)price of a related commodity.
B)income of consumers.
C)quantity of the commodity demanded.
D)price of the commodity.
E)both C and D.

Question 5

An increase in the number of firms wanting to provide accounting services will cause a for accounting services.

A)simultaneous shift of both the demand and supply curves
B)rightward shift in the demand curve
C)leftward shift in the demand curve
D)rightward shift in the supply curve
E)leftward shift in the supply curve

Question 6

A variable that is a "stock"

A)is used only in accounting.
B)has only to do with products where inventory is kept.
C)is measured per unit of time.
D)has the same units as a flow variable.
E)has meaning only at a point in time.

Question 7

Suppose there is a decrease in the quantity supplied of copper at each price.This change would imply

A)a shift to the right of the supply curve.
B)a movement down the supply curve.
C)a movement up the supply curve.
D)a shift to the left of the supply curve.

Question 8

To say that the supply curve is positively sloped means that

A)households will want to buy less at higher prices.
B)as price goes up,quantity supplied will remain constant.
C)as price goes up,quantity supplied will increase.
D)if the costs of production increase,the quantity supplied will have to increase also.
E)as price goes up,quantity supplied will decrease.

Question 9

Suppose that the demand and supply curves in the market for apples have the following functional form: QD = 250 - 4p and QS = 10 + p.If the prevailing price on the market is 50,then

A)the market exhibits an excess supply of 240 units.
B)the market exhibits an excess demand of 10 units.
C)the market exhibits an excess supply of 10 units.
D)the market is clearing.
E)the market exhibits an excess demand of 240 units.

Question 10

A variable that is assumed to be constant along an individual's demand curve for good X is the

A)quantity of X demanded per unit of time.
B)amount of X the individual wishes to purchase.
C)price of good X.
D)price of a substitute good,Y.
E)consumer's real purchasing power.

Question 11

A fall in the price of potatoes,which are used in the production of french fries,will

A)have no effect on the supply of french fries but cause a movement along the supply curve of french fries.
B)lead to a decrease in the demand for french fries.
C)lead to a decrease in the supply of french fries,causing the supply curve of french fries to shift to the left.
D)have no effect on the supply of french fries.
E)lead to an increase in the supply of french fries,causing the supply curve of french fries to shift to the right.

Question 12

A demand curve is a representation of the relationship,ceteris paribus,between quantity demanded and

A)income.
B)preferences.
C)wealth.
D)price.
E)supply.

Question 13

Suppose that many coal mines are shut for environmental reasons.This will cause

A)no change in the supply curve,only a change in price.
B)an increase in the supply of coal (a rightward shift of the supply curve).
C)a movement down the supply curve.
D)a decrease in the supply of coal (a leftward shift of the supply curve).
E)a movement up the supply curve.

Question 14

A change in demand is said to take place when there is a

A)shift of the supply curve.
B)quantity change.
C)shift of the demand curve.
D)price change.
E)movement along the demand curve.

Question 15

The market supply curve for wooden shipping crates would shift to the right

A)if the prices of inputs fall.
B)if a government subsidy for shipping crates is withdrawn.
C)if suppliers leave the industry.
D)if technological conditions for the production of crates deteriorates.
E)if a tax is applied to shipping crates.

Question 16

Suppose we observe an increase in the price of good A and an increase in the quantity of good A exchanged.Which of the following is a likely explanation?

A)The supply of good A has increased.
B)The "law of supply" is violated.
C)The "law of demand" is violated.
D)The demand for good A has increased.
E)There is an excess supply of good A.

Question 17

In a market for a good or service,the quantities demanded and supplied are

A)both stock variables.
B)a flow variable and a stock variable,respectively.
C)both flow variables.
D)neither stock nor flow variables.
E)a stock variable and a flow variable,respectively.

Question 18

Aeronautical engineers are a factor of production for airplanes.What will happen in the world market for airplanes when there is a worldwide shortage of aeronautical engineers?

A)price will decrease,quantity exchanged will decrease
B)price will decrease,quantity exchanged will increase
C)price will increase,quantity exchanged will decrease
D)price will increase,quantity exchanged will increase
E)there will be no change in price or quantity exchanged

Question 19

Which statement best describes a "demand schedule"?

A)an abstract concept underlying the graph of a demand curve
B)a graph showing the inverse relationship between quantity demanded and price
C)a timetable showing the quantity demanded at different time periods
D)a numerical tabulation showing the quantities demanded at various prices
E)a functional statement of the demand relationship

Question 20

If a change in tastes has raised the price of tomatoes by 5% when the general price level increased by 2%,the price of tomatoes

A)ultimately increased by 7%.
B)increased by 3% relative to the average of all prices.
C)is not affected by inflation as much.
D)is not of interest anymore because it is rendered meaningless by the inflation.
E)in fact increased by 3%.

Question 21

Consider cars and gasoline.Other things being equal,when the price of cars decreases,the demand for gasoline is likely to

A)remain unchanged.
B)remain unchanged because cars and gasoline are produced independently of one another.
C)decrease because the two goods are complements.
D)remain unchanged because cars and gasoline are two distinct markets.
E)increase because the two goods are complements.

Question 22

The table below displays hypothetical demand and supply schedules for the market for overnight parcel deliveries in Canada. $$\begin{array} { | c | c | c | c | c | c | } \hline & \begin{array} { c } \text { Quantity } \\\text { Demanded } \\\text { (millions) }\end{array} && & \begin{array} { c } \text { Quantity } \\\text { Supplied } \\\text { (millions) }\end{array} & \\\hline \text { Price (\$) } & \text { Year 1 } & \text { Year 2 } & & \text { Year 1 } & \text { Year 2 } \\\hline & & & & & \\\hline 30 & 80 & 95 & & 140 & 125 \\\hline 26 & 90 & 105 & & 135 & 120 \\\hline 22 & 100 & 115 & & 130 & 115 \\\hline 18 & 110 & 125 & & 125 & 110 \\\hline 14 & 120 & 135 & & 120 & 105 \\\hline 10 & 130 & 145 & & 115 & 100 \\\hline\end{array}$$ TABLE 3- 3

-At the market- clearing price for a commodity

A)prices will remain unchanged,even if there is excess demand.
B)there will never again be any pressure for prices to change,independent of what happens to demand or supply.
C)shifts in the supply or demand curves will not cause price changes.
D)the quantity supplied of the commodity equals quantity demanded.
E)there may be excess demand for a product but not excess supply.

Question 23

"Demand" in a particular market refers to

A)the quantity that is desired but not satisfied by current supply.
B)the quantity purchased at the current market price.
C)the relationship between demand and supply.
D)only the quantity demanded by households at current market prices.
E)the entire relationship between quantity demanded and price.

Question 24

The table below displays hypothetical demand and supply schedules for the market for overnight parcel deliveries in Canada. $$\begin{array} { | c | c | c | c | c | c | } \hline & \begin{array} { c } \text { Quantity } \\\text { Demanded } \\\text { (millions) }\end{array} && & \begin{array} { c } \text { Quantity } \\\text { Supplied } \\\text { (millions) }\end{array} & \\\hline \text { Price (\$) } & \text { Year 1 } & \text { Year 2 } & & \text { Year 1 } & \text { Year 2 } \\\hline & & & & & \\\hline 30 & 80 & 95 & & 140 & 125 \\\hline 26 & 90 & 105 & & 135 & 120 \\\hline 22 & 100 & 115 & & 130 & 115 \\\hline 18 & 110 & 125 & & 125 & 110 \\\hline 14 & 120 & 135 & & 120 & 105 \\\hline 10 & 130 & 145 & & 115 & 100 \\\hline\end{array}$$ TABLE 3- 3

-The quantity exchanged in the market will be below the equilibrium quantity

A)only if there is excess demand.
B)if there is either excess supply or demand.
C)only if price is below the equilibrium price.
D)in no imaginable situation.
E)only if there is excess supply.

Question 25

Economists say there has been a change in demand when there is

A)a movement along the demand curve.
B)a quantity change.
C)a shift of the demand curve.
D)a shift of the supply curve.
E)a price change.

Question 26

Ceteris paribus means

A)and so forth.
B)other things being equal.
C)in a historical context.
D)knowledge gained before the study of evidence is made.
E)among other things.

Question 27

The table below displays hypothetical demand and supply schedules for the market for overnight parcel deliveries in Canada. $$\begin{array} { | c | c | c | c | c | c | } \hline & \begin{array} { c } \text { Quantity } \\\text { Demanded } \\\text { (millions) }\end{array} && & \begin{array} { c } \text { Quantity } \\\text { Supplied } \\\text { (millions) }\end{array} & \\\hline \text { Price (\$) } & \text { Year 1 } & \text { Year 2 } & & \text { Year 1 } & \text { Year 2 } \\\hline & & & & & \\\hline 30 & 80 & 95 & & 140 & 125 \\\hline 26 & 90 & 105 & & 135 & 120 \\\hline 22 & 100 & 115 & & 130 & 115 \\\hline 18 & 110 & 125 & & 125 & 110 \\\hline 14 & 120 & 135 & & 120 & 105 \\\hline 10 & 130 & 145 & & 115 & 100 \\\hline\end{array}$$ TABLE 3- 3

-Refer to Table 3- 3.Suppose the price of overnight parcel delivery in Year 1 is $22.Which of the following statements is correct? In Year 1

A)there is an excess demand of 30 million deliveries.
B)115 million parcels will be delivered.
C)there is an excess supply of 15 million deliveries.
D)there is an excess supply of 30 million deliveries.
E)there is an excess demand of 15 million deliveries.

Question 28

If goods X and Y are complements and the price of X falls,all other things being equal,the demand curve for Y will

A)not shift at all.
B)shift to the left.
C)shift to the right.
D)unable to determine.

Question 29

Suppose that the demand and supply curves for green tea are stated functionally as QD = 700 - P and QS = 400 + 2P.Suppose also that a study is released proving that the regular consumption of green tea prolongs life by at least a decade,and the result is that the quantity demanded of green tea doubles at the initial equilibrium price.The equilibrium price in this case will increase by

A)140%
B)100%
C)300%
D)200%
E)Insufficient information to compute

Question 30

Suppose the demand curves for goods A,B,and C have the following functional forms,where Q denotes quantity demanded,P denotes price,and M denotes income: QA = 120 - 3.5PA - 6PB + 14M QB= 100 - 2PB + 3PC + 1.1M QC = 1500 - 0.5PC - 300M.
Based on these demand curves,which of the following goods are known to be inferior goods?

A)A
B)B
C)C
D)A and B only
E)A,B and C

Question 31

A surplus exists in the market when

A)supply and demand are equal.
B)the quantity demanded is less than the quantity supplied.
C)the supply curve has shifted to the left.
D)the equilibrium price is too low.
E)the quantity demanded exceeds the quantity supplied.

Question 32

A change in which of the following variables will result in NO change in the demand for a given commodity?

A)tastes in favour of the commodity
B)average household income
C)population
D)the distribution of income
E)the price of the commodity

Question 33

Suppose an index of average prices of imported goods in Canada indicates an increase in price of 2.3% over a 12- month period.Over the same period the Consumer Price Index indicates an increase in the general price level of 2.3%.What is the change in the price of imports relative to the change in the overall price level?

A)no change
B)an increase of 4.6%
C)an increase of 2.3%
D)a decrease of 4.6%
E)a decrease of 2.3%

Question 34

Which statement best describes the "law of demand"? Other things being equal,the quantity of tennis rackets demanded will be greater if the

A)price of tennis rackets is lower.
B)incomes of tennis players are higher.
C)number of tennis players is higher.
D)price of badminton rackets is higher.
E)demand for tennis rackets rises.

Question 35

Which of the following best defines quantity demanded?

A)The amount,per time period,that is desired at the most recent price.
B)The amount an individual purchases at its current price.
C)The various amounts that a society desires at all relevant prices.
D)The amount,per time period,an individual desires to purchase at any given price.
E)The amount an individual purchases at his or her current income.

Question 36

If goods X and Y are substitutes and the price of X falls,all other things being equal,the demand curve for Y will

A)shift to the left.
B)shift to the right.
C)be indeterminate.
D)not shift at all.

Question 37

Which of the following pairs of goods are likely to be substitutes for a large group of consumers?

A)green beans and peas
B)wieners and buns
C)pancakes and syrup
D)eggs and toast
E)coffee and cream

Question 38

The "law of demand" hypothesizes that,other things being equal,

A)the lower the price,the greater the demand.
B)the higher the price,the lower the quantity demanded.
C)price and quantity demanded are positively related.
D)the higher the income,the higher the quantity demanded.
E)price and demand vary inversely.

Question 39

The table below displays hypothetical demand and supply schedules for the market for overnight parcel deliveries in Canada. $$\begin{array} { | c | c | c | c | c | c | } \hline & \begin{array} { c } \text { Quantity } \\\text { Demanded } \\\text { (millions) }\end{array} && & \begin{array} { c } \text { Quantity } \\\text { Supplied } \\\text { (millions) }\end{array} & \\\hline \text { Price (\$) } & \text { Year 1 } & \text { Year 2 } & & \text { Year 1 } & \text { Year 2 } \\\hline & & & & & \\\hline 30 & 80 & 95 & & 140 & 125 \\\hline 26 & 90 & 105 & & 135 & 120 \\\hline 22 & 100 & 115 & & 130 & 115 \\\hline 18 & 110 & 125 & & 125 & 110 \\\hline 14 & 120 & 135 & & 120 & 105 \\\hline 10 & 130 & 145 & & 115 & 100 \\\hline\end{array}$$ TABLE 3- 3

-Refer to Table 3- 3.The equilibrium price and quantity for overnight parcel delivery in Year 1 is and million parcels.

A)$30; 80
B)$22; 130
C)$14; 120
D)$22; 115
E)$10; 115

Question 40

Tickets for music concerts that are sold on the Internet are often sold out within minutes and many unsatisfied customers are unable to get tickets (in the legitimate market).One explanation for this is that

A)the market price for concert tickets may be set below its equilibrium price.
B)the market price for concert tickets is at its equilibrium level.
C)prices for purchasing digital music have increased.
D)concert goers are not rational.
E)the market price for concert tickets may be set above its equilibrium price.

Question 41

The term "quantity supplied" is the amount of a commodity that

A)is exchanged between firms and consumers during a given period of time at a given price.
B)firms wish to sell at a given price during a given period of time.
C)households wish firms would sell during a given period of time at a given price.
D)is supplied at a fair market price.
E)firms actually sell during a given period of time at a given price.

Question 42

Four of the five statements below contain a stock and a flow.Which statement describes ONLY stock variables OR flow variables?

A)The Transit Authority of Mytown collects $22 000 in fares per day and has an operating budget of $2 million per year.
B)Country X spends an average of $1 million per year for flood relief and has an emergency services fund of $20 million.
C)The Canadian Federal government has a debt of approximately $450 billion and an annual deficit of over $25 billion dollars.
D)Nancy spends $400 per month on her credit card and has a balance owing of $2567.
E)Chris earns $1500 per month and has $4000 in his savings account at the bank.

Question 43

"Excess demand" can also be described as

A)quantity demanded exceeding quantity supplied.
B)excess supply.
C)the area to the right of the equilibrium price on a supply and demand diagram.
D)quantity supplied exceeding quantity demanded.
E)the area to the left of the equilibrium price on a supply and demand diagram.

Question 44

For a given commodity,quantity demanded can be represented by

A)a point on a demand curve.
B)a demand curve.
C)a demand schedule.
D)the price on the vertical axis.
E)the money value of the stock of the commodity held by households.

Question 45

The time period to which quantity demanded refers when constructing demand curves is

A)a period shorter than one year.
B)any specified time period.
C)a moment in time.
D)a long period of time.
E)one year.

Question 46

An improvement in the technology used to produce solar panels will

A)lead to a leftward shift in the supply curve.
B)lead to a rightward shift of the demand curve.
C)lead to a leftward shift of the demand curve.
D)have no effect on the supply curve for solar panels.
E)lead to a rightward shift in the supply curve.

Question 47

A normal good is one

A)for which demand varies directly with household income.
B)for which demand does not vary with household income.
C)for which demand varies inversely with household income.
D)that normal people consume.
E)that everyone normally consumes.

Question 48

Suppose the demand curves for goods A,B,and C have the following functional forms,where Q denotes quantity demanded,P denotes price,and M denotes income: QA = 120 - 3.5PA - 6PB + 14M QB = 100 - 2PB + 3PC + 1.1M QC = 1500 - 0.5PC - 300M.
Based on these demand curves,which of the following goods are known to be normal goods?

A)A
B)B
C)C
D)A and B only
E)A,B and C

Question 49

Suppose that the price of good X increases from $3.00 to $4.00 while the price of good Y increases from $150 to $200.The relative price of X (in terms of Y)

A)remained constant.
B)has risen.
C)cannot be determined from the above data.
D)has fallen.
E)is completely unrelated to the price of good Y.