Deck 3: Demand and Supply

Question 1

Which of the following shifts the supply curve rightward?

A)A decrease in the price of the good
B)An increase in the population
C)A decrease in the price of a factor of production used to produce the good
D)A positive change in preferences for the good

Answer 1

C

Question 2

The "law of supply" states that, other things remaining the same, firms produce

A)less of a good as the required resources become scarcer.
B)more of a good the higher its price.
C)more of a good the less it costs to produce it.
D)less of a good the more it costs to produce it.

Answer 2

B

Question 3

Ham and eggs are complements. If the price of ham rises, the demand for eggs will

A)increase or decrease but the demand curve for ham will not change.
B)decrease and the demand curve for eggs will shift leftward.
C)not change but there will be a movement along the demand curve for eggs.
D)decrease and the demand curve for ham will shift rightward.

Answer 3

B

Question 4

If the price of a CD is equal to the equilibrium price, there will be of CDs and the price will .

A)a surplus; rise
B)neither a shortage nor a surplus; not change
C)a surplus; fall
D)a shortage; fall

Question 5

Which of the following will NOT shift the supply curve for pick- up trucks?

A)A change in the price of pick- up trucks
B)A technological advance
C)A change in the number of firms supplying pick- up trucks
D)An increase in the price of a resource used to produce pick- up trucks

Question 6

Suppose the equilibrium price of bottled water has risen from $1.00 per bottle to $2.00 per bottle and the equilibrium quantity has increased. These changes are a result of a shift of the
Curve for bottled water.

A)rightward; demand
B)leftward; supply
C)rightward; supply
D)leftward; demand

Question 7

If both the demand and supply increase, the equilibrium quantity and the equilibrium price _ _.

A)decreases; might rise, fall or not change
B)increases; falls
C)decreases; rises
D)increases; might rise, fall or not change

Question 8

The quantity supplied of a good or service is the quantity that a producer at a particular price during a given time period.

A)should sell
B)needs to sell
C)is willing to sell
D)actually sells

Question 9

Good A and good B are substitutes in production. The demand for good A increases so that the price of good A rises. The increase in the price of good A shifts the

A)supply curve of good B leftward.
B)demand curve for good B rightward.
C)supply curve of good B rightward.
D)demand curve for good B leftward.

Question 10

A bakery can produce either cakes or cookies. If the price of cookies rises, then

A)there is a movement upward along the supply curve of cakes.
B)there is a movement downward along the supply curve of cakes.
C)the supply curve of cake shifts rightward.
D)the supply curve of cake shifts leftward.

Question 11

Which of the following is the BEST way to describe equilibrium in a market? At equilibrium, the

A)supply and demand curves can never shift again.
B)price is usually affordable to most people.
C)price is the lowest possible.
D)quantity supplied equals the quantity demanded.

Question 12

Consider the demand curves for soft drinks shown in the figure above. Suppose the economy is at point a. Which of the following could result in a movement to point d?

A)A decrease in the price of bottled water
B)A decrease in the relative price of a soft drink
C)A decrease in income
D)An increase in the relative price of a soft drink

Question 13

When the price of a normal good falls, the substitution effect leads to _ in the quantity purchased and the income effect leads to in the quantity purchased.

A)an increase; an increase
B)a decrease; an increase
C)a decrease; a decrease
D)an increase; a decrease

Question 14

An increase in the expected future price of a good

A)decreases its demand.
B)increases its supply.
C)increases its demand.
D)has no effect on either its demand or its supply.

Question 15

As the relative price of a good falls, the substitution effect implies that people buy

A)less of that good and less of its substitutes.
B)less of that good and more of its substitutes.
C)more of that good and less of its substitutes.
D)more of that good and more of its substitutes.

Question 16

Which of the following leads to a movement along the demand curve for spinach but does not shift the demand curve for spinach?

A)A newly discovered health benefit from eating spinach
B)A rise in the price of spinach
C)An increase in income for all spinach lovers
D)An increase in the price of broccoli, a substitute for spinach

Question 17

The figure above shows the demand for fruit snacks. Which movement reflects an increase in demand?

A)From point a to point c
B)From point a to point d
C)From point a to point b
D)From point a to point e

Question 18

Which of the following explain(s)why supply curves slope upward?

A)Substitutes in production and complements in production
B)Resources and technology
C)Increasing marginal cost
D)Prices and income

Question 19

The figure above shows supply curves for soft drinks. Suppose the economy is at point a. A movement to point b could be the result of

A)an increase in technology.
B)a decrease in the relative price of a soft drink.
C)an increase in the money price of a soft drink.
D)an increase in the relative price of a soft drink.

Question 20

In the above figure, if D2 is the original demand curve and consumers come to expect that the price of the good will rise in the future, which price and quantity might result?

A)Point a, with price P2 and quantity Q2.
B)Point b, with price P1 and quantity Q1.
C)Point c, with price P₃ and quantity Q_3.
D)Point d, with price P₁ and quantity Q_3.

Question 21

Which of the following raises the price of a used car and increases the equilibrium quantity sold?

A)A new 8 per cent excise tax placed on all new car purchases
B)A special rebate program on all new cars
C)An increase in wages for used car salespeople
D)None of the above answers is correct.

Question 22

Which of the following raises the equilibrium price and increases the equilibrium quantity of used cars?

A)A fall in income if used cars are an inferior good
B)An increase in the wage rate paid to used car salespeople
C)Neither A nor B because the question suggests a violation of the "law of demand."
D)Neither A nor B because the question suggests a violation of the "law of supply."

Question 23

Bicycles are made out of steel. If the price of steel increases, there is a shift in the supply curve of bicycles that leads to

A)a temporary surplus of bicycles.
B)a permanent surplus of bicycles.
C)an increase in the price of a bicycle.
D)a shift in the demand curve for bicycles.

Question 24

Every spring, motorists do more driving than during the winter months. Every spring, the price of petrol increases and the motorists buy more petrol. This experience suggests that the

A)laws of supply and demand are both contradicted for petrol, though only during the spring driving season.
B)"law of supply" does not always hold for necessities like petrol.
C)"law of demand" does not always hold for necessities like petrol.
D)None of the above answers is correct.

Question 25

A relative price is

A)the number of dollars that must be given up in exchange for the good.
B)also called the money price.
C)the ratio of one price to another price.
D)not an opportunity cost.

Question 26

Demands differ from wants because

A)wants require a plan to acquire a good but demands require no such plan.
B)demands are unlimited, whereas wants are limited by income.
C)wants imply a decision about which demands to satisfy, while demands involve no specific plan to acquire the good.
D)demands reflect a decision about which wants to satisfy and a plan to buy the good, while wants are unlimited and involve no specific plan to acquire the good.

Question 27

The price of cereal rises. As a result, people have cereal for breakfast on fewer days and eat eggs instead. This behaviour is an example of

A)an increase in the quantity supplied of eggs because of the income effect.
B)an increase in the quantity demanded of eggs because of the income effect.
C)a decrease in the quantity demanded of cereal because of the substitution effect.
D)a decrease in the quantity supplied of cereal because of the substitution effect.

Question 28

If the quantity of textbooks supplied is 10,000 per year and the quantity of textbooks demanded is 12,000 per year, there is a in the market and the price will .

A)shortage; rise
B)surplus; rise
C)shortage; fall
D)surplus; fall

Question 29

An increase in the price of jet fuel will _ air flights and the equilibrium quantity of air flights will _.

A)increase the demand for; increase
B)decrease the demand for; decrease
C)decrease the supply of; increase
D)decrease the supply of; decrease

Question 30

The "law of demand" implies that demand curves

A)slope up.
B)shift rightward whenever the price rises.
C)slope down.
D)shift leftward whenever the price rises.

Question 31

The figure above shows supply curves for soft drinks. Suppose the economy is at point a. An increase in the price of a soft drink is shown as a movement from point a to

A)none of the points that are illustrated.
B)point b.
C)point c.
D)point d.

Question 32

Each point on the demand curve reflects

A)the highest price consumers are willing and able to pay for that particular unit of a good.
B)all the wants of a given household.
C)the lowest- cost technology available to produce a good.
D)the minimum price consumers are willing and able to pay for that particular unit of a good.

Question 33

In the above figure, a price of $15 per dozen roses would result in a so that the price of roses will .

A)shortage; fall
B)surplus; fall
C)surplus; rise
D)shortage; rise

Question 34

The "law of demand" refers to the fact that, all other things remaining the same, when the price of a good rises

A)the demand curve shifts rightward.
B)there is a movement up along the demand curve to a smaller quantity demanded.
C)there is a movement down along the demand curve to a larger quantity demanded.
D)the demand curve shifts leftward.

Question 35

Which of the following is NOT held constant while moving along a supply curve?

A)The number of sellers
B)Prices of factors of production
C)The price of the good itself
D)Expected future prices

Question 36

The quantity demanded is

A)independent of the price of the good.
B)independent of consumers' buying plans.
C)the amount of a good that consumers plan to purchase at a particular price.
D)always equal to the equilibrium quantity.

Question 37

Twenty years ago a stove cost $300 and a refrigerator cost $1,500. Today a stove costs $600, while a refrigerator costs $1,800. Which of the following statements is true?

A)The relative price of a refrigerator has increased.
B)The relative price of a stove has increased.
C)The money price of a refrigerator has fallen.
D)The relative price of stoves and refrigerators has not changed.

Question 38

The figure above shows the demand for fruit snacks. Which movement reflects an increase in income if fruit snacks are an inferior good?

A)From point a to point b
B)From point a to point e
C)From point a to point c
D)From point a to point d

Question 39

Which of the following statements is correct?

A)When demand decreases, both the price and the quantity increase.
B)When supply increases, the quantity increases and the price falls.
C)When supply decreases, both the price and the quantity decrease.
D)When demand increases, both the price and the quantity decrease.

Question 40

Scarcity guarantees that

A)demands will be equal to wants.
B)most demands will be satisfied.
C)demands will exceed wants.
D)wants will exceed demands.

Question 41

Which of the following increases the quantity supplied of good X but does NOT increase the supply of good X?

A)An increase in the price of X
B)A fall in the price of a factor production used to produce X
C)An increase in the price of good Y, a complement in the production of X
D)An advance in the technology for producing X

Question 42

Oatmeal is a normal good and cold cereal is a substitute for oatmeal. Raisins are a complement for oatmeal. Which of the following increases the demand for oatmeal?

A)An increase in the price of raisins
B)A decrease in income
C)An increase in the price of cold cereal
D)A decrease in population

Question 43

The observation that the demand curve for grape jam shifts rightward every time the price of peanut butter falls, means that grape jam and peanut butter are

A)normal goods.
B)complements.
C)inferior goods.
D)substitutes.

Question 44

An increase in the number of fast- food restaurants

A)increases the demand for substitutes for fast- food meals.
B)increases the supply of fast- food meals.
C)increases the demand for fast- food meals.
D)raises the price of fast- food meals.

Question 45

In the above figure, if D2 is the original demand curve and the price of a substitute in consumption rises, which price and quantity might result?

A)Point a, with price P2 and quantity Q2.
B)Point b, with price P1 and quantity Q1.
C)Point c, with price P₃ and quantity Q_3. D)Point d, with price P₁ and quantity Q_3.

Question 46

When the price of a pizza decreases from $12 to $10, it is definitely the case that the

A)substitution effect means people buy more pizza.
B)quantity demanded of pizza will not change.
C)income effect means people buy less pizza.
D)None of the above answers is correct.

Question 47

A market where no single buyer or seller can influence the price is

A)a seller's market.
B)a buyer's market.
C)an output market.
D)a competitive market.

Question 48

Which of the following results in a movement along the supply curve of spinach but does not shift the supply curve of spinach?

A)Disastrous weather that destroys half of this year's spinach crop
B)An increase in wages for workers in spinach fields
C)A rise in the price of spinach
D)Great weather that produces a bumper spinach crop this year

Question 49

The supply curve slopes upward when graphed against , because of .

A)income; decreasing marginal cost
B)the price of the good; increasing marginal cost
C)the price of the good; decreasing marginal cost
D)income; increasing marginal cost

Question 50

An increase in technology for producing personal computers leads to

A)an increase in the demand for personal computers.
B)a decrease in the supply of personal computers.
C)a decrease in the demand for personal computers.
D)an increase in the supply of personal computers.

Question 51

Auto workers negotiate a wage increase. How does this wage hike affect the supply of cars?

A)It has no effect.
B)It decreases the supply.
C)It increases the supply.
D)There is not enough information to tell if the change increases, decreases, or has no effect on the supply of cars.

Question 52

There is a technological advance in the production of a good and simultaneously also an increase in the expected future price. Which of the following will happen?

A)The technological improvement shifts the supply curve rightward while the increase in the expected future price shifts the supply curve leftward. The net effect is not known.
B)The equilibrium price will rise because the supply curve shifts rightward.
C)The equilibrium price falls because the supply curve shifts leftward.
D)The demand curve shifts rightward and the supply curve does not shift.

Question 53

The price of the steel used to produce car engines increases. How does this price hike affect the demand curve for cars?

A)The demand curve does not shift.
B)There is not enough information to tell how the change shifts the demand curve for cars
C)The demand curve shifts leftward.
D)The demand curve shifts rightward.

Question 54

How many sides does a market have?

A)Two sides-buyers and sellers
B)Many sides; it depends on the type of product
C)Two sides-domestic and foreign
D)Three sides-buyers, sellers and the government

Question 55

If the price of a chocolate bar is $1 and the price of a fast food meal is $5, then the

A)relative price of a fast food meal is 5 chocolate bars per fast food meal.
B)money price of a fast food meal is 1/5 of a chocolate bar per fast food meal.
C)money price of a chocolate bar is 1/5 of a fast food meal per chocolate bar.
D)relative price of a chocolate bar is 5 fast food meals per chocolate bar.

Question 56

The figure above shows supply curves for soft drinks. Suppose the economy is at point a. A decrease in the price of sugar used to make soft drinks is shown as a movement from point a to a point such as

A)none of the points that are illustrated.
B)point b.
C)point c.
D)point d.

Question 57

Long- distance travel by bus is an inferior good. As people's incomes increase and other things remain the same, you predict that the

A)price of long- distance travel by bus will fall.
B)demand for long- distance travel by bus will decrease and the price will rise.
C)price of long- distance travel by bus will fall and the demand for long- distance travel by bus will increase.
D)demand for long- distance travel by bus will increase as the price of long- distance travel by bus falls.

Question 58

Good A and good B are substitutes in production. The demand for good A decreases, which lowers the price of good A. The decrease in the price of good A

A)increases the supply of good B.
B)decreases the demand for good B.
C)increases the demand for good B.
D)decreases the supply of good B.

Question 59

When a market is in equilibrium,

A)the supply curve has the same slope as the demand curve.
B)everyone has all they want of the commodity in question.
C)the number of buyers is exactly equal to the number of sellers.
D)there is no shortage and no surplus at the equilibrium price.

Question 60

A decrease in the expected future price of cars

A)decreases the current demand for cars, that is, there is a leftward shift of the demand curve for cars.
B)decreases the current quantity demanded of cars, that is, there is a movement upward along the demand curve for cars.
C)increases the current quantity demanded of cars, that is, there is a movement downward along the demand curve for cars.
D)increases the current demand for cars, that is, there is a rightward shift of the demand curve for cars.

Question 61

In the above figure, the equilibrium price is and the equilibrium quantity is .

A)$2; 500 units
B)$8; 400 units
C)$6; 300 units
D)$4; 200 units

Question 62

If the price of crude oil falls, the equilibrium price of petrol and the equilibrium quantity
.

A)falls; increases
B)falls; decreases
C)rises; increases
D)rises; decreases

Question 63

If the quantity demanded exceeds the quantity supplied, then there is

A)a surplus and the price is above the equilibrium price.
B)a shortage and the price is above the equilibrium price.
C)a shortage and the price is below the equilibrium price.
D)a surplus and the price is below the equilibrium price.

Question 64

The equilibrium quantity will decrease and the price might rise, fall or stay the same when the

A)demand for a good decreases and the supply of it increases.
B)demand and the supply of a good both increase.
C)demand and the supply of a good both decrease.
D)demand for a good increases and the supply of it decreases.

Question 65

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

A)an increase in the price of coffee decreases the quantity of tea demanded.
B)a decrease in the price of petrol decreases the quantity of petrol demanded.
C)an increase in the price of pizza decreases the quantity of pizza demanded.
D)an increase in the price of downloaded music decreases the demand for downloaded music.

Question 66

A complement is a good

A)used in conjunction with another good.
B)of higher quality than another good.
C)of lower quality than another good.
D)used instead of another good.

Question 67

Which of the following decreases the demand for an inferior good?

A)A decrease in the price of a complement
B)A decrease in income
C)An increase in the price of a substitute
D)An increase in income

Question 68

Suppose a market begins in equilibrium. If supply increases, then at the original equilibrium price the quantity demanded

A)is less than the quantity supplied and a shortage results.
B)exceeds the quantity supplied and a shortage results.
C)exceeds the quantity supplied and a surplus results.
D)is less than the quantity supplied and a surplus results.

Question 69

Consider the demand curves for soft drinks shown in the figure above. Suppose the economy is at point a. Which of the following could result in a movement to point b?

A)A decrease in the relative price of a soft drink
B)A decrease in the price of bottled water
C)An increase in the opportunity cost of soft drinks
D)An increase in the price of bottled water

Question 70

Coffee and sugar are complements. If the supply curve of coffee shifts leftward because of poor weather, then there will be

A)a leftward shift of the demand curve for coffee.
B)a decrease in the price of sugar.
C)a leftward shift of the supply curve for sugar.
D)an increase in the price of sugar.

Question 71

Apples are a normal good, so if the price of an apple increases from 50¢ to 60¢, the quantity of apples demanded decreases because of

A)the income effect only.
B)a change in income.
C)the substitution and income effects.
D)the substitution effect only.

Question 72

In the figure above, which movement could be the result of an increase in the wages paid to oil workers?

A)Point a to point c
B)Point a to point b
C)Point a to point e
D)Point a to point d

Question 73

If a producer can use resources to produce either good A or good B, then A and B are

A)complements in production.
B)substitutes in production.
C)complements in consumption.
D)substitutes in consumption.

Question 74

When the demand for a good decreases, its equilibrium price and equilibrium quantity
.

A)falls; increases
B)rises; increases
C)rises; decreases
D)falls; decreases

Question 75

The quantity demanded of a good or service is the amount that

A)a consumer would like to buy but might not be able to afford.
B)consumers plan to buy during a given time period at a given price.
C)is actually bought during a given time period at a given price.
D)firms are willing to sell during a given time period at a given price.

Question 76

Which of the following statements is correct?

A)When both demand and supply decrease, the quantity decreases and the price might rise, fall or remain the same.
B)When both demand and supply decrease, the quantity increases and the price might rise, fall or remain the same.
C)When both demand and supply increase, the price rises and the quantity might increase, decrease or remain the same.
D)When both demand and supply increase, the quantity decreases and the price might rise, fall or remain the same.

Question 77

The above figure shows the market for petrol. When a cyclone destroys a major refinery that refines oil into petrol, the

A)demand curve for petrol shifts from D1 to D2 and the supply curve of petrol shifts from S2 to S₁.
B)demand curve for petrol does not shift, and the supply curve of petrol shifts from S1 to S2.
C)demand curve for petrol does not shift, and the supply curve of petrol shifts from S2 to S1.
D)demand curve for petrol shifts from D1 to D2 and the supply curve of petrol does not shift.

Question 78

When the price of a pizza decreases from $14 to $12,

A)the income effect means people buy less pizza.
B)the income effect means that the demand for pizza will not change.
C)the income effect points out that the total purchasing power of people who buy pizza increases.
D)None of the above answers is correct.

Question 79

Beef and leather belts are complements in production. If people's concern about health shifts the demand curve for beef leftward, the result in the market for leather belts will be a

A)lower equilibrium price for a leather belt because there is an increase in the supply of leather belts.
B)higher equilibrium price for a leather belt because there is an increase in the supply of leather belts.
C)higher equilibrium price for a leather belt because there is a decrease in the supply of leather belts.
D)lower equilibrium price for a leather belt because there is a decrease in the supply of leather belts.

Question 80

In the above figure, an increase in the quantity demanded is represented by a movement from point d to

A)point c only.
B)point b only.
C)both points b and c.
D)point a.