Deck 4: Demand Supply and Markets

Question 1

For a renter, the income effect of an increase in apartment rents will

A)have a greater effect than the income effect of an increase in the price of chewing gum
B)have no impact on the demand curve for apartments, because everything except price is
Assumed constant
C)have less of an effect than the income effect of an increase in the price of chewing gum
D)be almost negligible, because housing is a necessity
E)occur only when income increases

Answer 1

A

Question 2

The income effect refers to the impact of a change in

A)income on the price of a good
B)the general price level caused by a change in the price of another good
C)the price of a good on real income
D)the price of a substitute for the good under consideration
E)demand when income changes

Answer 2

C

Question 3

A demand curve shows how quantity demanded changes as the pricechanges.It implies that

A)only a change in price can shift a demand curve
B)everything else that affects demand is assumed to be constant
C)quantity demanded is unrelated to price
D)economists are concerned only with money
E)it is impossible to show how anything but price affects demand

Answer 3

B

Question 4

The income effect of an increase in the price of backpacks (a normal good)is a(n)

A)decrease in the demand for backpacks
B)decrease in the quantity demanded of backpacks
C)increase in the demand for backpacks
D)increase in the quantity demanded of backpacks
E)new demand curve because everything else is no longer constant

Question 5

The substitution effect of a change in the price of bananas refers to the wayin which a change in the

A)price of a substitute affects the demand for bananas
B)price of bananas affects the ability to buy them
C)relative price of bananas changes demand for them
D)relative price of bananas changes the quantity demanded of bananas
E)price of a substitute affects the quantity demanded of bananas

Question 6

The income effect of a decrease in the price of legal services (a normalgood) is a(n)

A)decrease in the demand for legal services
B)decrease in the quantity demanded of legal services
C)increase in the demand for legal services
D)increase in the quantity demanded of legal services
E)new demand curve because everything else is no longer constant

Question 7

The demand for a product is the amount that

A)buyers purchase in the market
B)buyers are willing to purchase at a given price
C)sellers are willing to sell at a particular price
D)buyers are willing and able to purchase at alternative prices
E)buyers are able to purchase at a specific price

Question 8

In what way is consumer demand different from consumer wants?

A)Demand is only for necessities.
B)Demand is only for luxuries.
C)Demand takes into account the ability to pay.
D)Consumer wants are only for luxuries.
E)Consumer wants are only for necessities.

Question 9

For which of the following would the income effect of a price change begreatest?

A)ballpoint pens
B)air travel to Australia
C)chewing gum
D)haircuts
E)college textbooks

Question 10

The law of demand assumes that as the price of a good increases,

A)people recognize that its price may be even higher in the future, so they buy now rather than later
B)consumers tend to shift their purchases to relatively cheaper substitutes
C)people will buy less of it in the hope that the good will be cheaper in the future
D)the consumer's money income increases, and he or she is less able to buy all goods, including the good
Whose price has increased
E)the consumer's money income decreases, and if the product is a normal good, more will be purchased

Question 11

The impact of a $200 increase in income on quantity demanded would becalled an income effect.

Question 12

The substitution effect of a price change describes what happens to the shiftin demand for a good when its price changes.

Question 13

The law of demand says that the lower the price of a good, other thingsconstant,

A)the smaller the demand for that good
B)the larger the demand for that good
C)the smaller the quantity demanded of that good
D)the larger the quantity demanded of that good
E)the smaller the real income of consumers and the lower the quantity demanded of that good

Question 14

)The law of demand states that

A)there is a positive relationship between price and quantity demanded
B)price is the only factor that influences the quantity that people are willing and able to buy
C)price and quantity demanded are inversely related
D)the demand curve shifts whenever the price of a good changes
E)by producing a product, firms create a demand for it

Question 15

Movements along a demand curve are called changes in

A)demand
B)opportunity costs
C)quantity demanded
D)the substitution effect
E)preferences

Question 16

The law of demand is illustrated by a demand curve that is

A)horizontal
B)vertical
C)upward sloping
D)constant
E)downward sloping

Question 17

Which of the following statements about the substitution effect of a pricechange is true?

A)It is caused by a change in relative prices.
B)It affects the consumer's ability, rather than willingness, to purchase a good.
C)It assumes that the consumer substitutes more expensive goods for cheaper ones when income
Increases.
D)It is usually equal to the income effect.
E)It may cause the consumer to buy less of the good when its price falls.

Question 18

The law of demand says that as the price of a good rises,

A)buyers recognize that price may be even higher in the future, and so they buy now
B)buyers purchase less in hopes that the price will fall in the future
C)buyers purchase less, in part because their real income has fallen
D)buyers purchase more, in part because the price of a substitute has risen
E)buyers purchase more, in part because it has higher status at a higher price

Question 19

Suppose you drink more tea because the price of coffee has increased.Which of the following best explains your action?

A)the law of supply
B)tea and coffee are complements
C)the substitution effect
D)the income effect
E)your nominal income has increased

Question 20

Suppose there are only two goods, apples and oranges.What happens if theprice of each good increases by 15 percent?

A)The consumer will substitute apples for oranges.
B)The consumer will substitute oranges for apples.
C)There is no substitution effect because relative prices have remained constant.
D)Demand for both goods increases.
E)Demand for both goods decreases.

Question 21

Which of the following is most likely to be a normal good?

A)trips to the laundromat
B)macaroni­and­cheese dinners
C)tickets to major league baseball games
D)bus rides
E)used paperback books

Question 22

Which of the following will not shift the demand curve for movie tickets?

A)a change in the cost of babysitting services
B)a change in the price of movie tickets
C)a change in the quality of television programs
D)a change in the income of movie­goers
E)a change in the number of consumers

Question 23

Which of the following is not true regarding a change in quantitydemanded?

A)A change in quantity demanded is shown by a movement along a given demand curve.
B)The demand curve shifts whenever the quantity demanded changes.
C)A change in the price of a good, other things constant, will lead to a change in quantity demanded.
D)The lower the price of a product, other things constant, the higher the quantity demanded.
E)A shift of the supply curve might cause a change in quantity demanded.

Question 24

The demand curve for spinach shows the quantity demanded of spinach

A)only at the equilibrium price of spinach
B)at each possible price of spinach
C)as income increases
D)as income decreases
E)at each possible price of a substitute good

Question 25

The income effect of a decrease in the price of potatoes (an inferior good)is a(n)

A)decrease in the demand for potatoes
B)decrease in the quantity demanded of potatoes
C)increase in the demand for potatoes
D)increase in the quantity demanded of potatoes
E)new demand curve because everything else is no longer constant

Question 26

A change in income will

A)affect the demand for candy through the income effect of a price change
B)affect the quantity demanded of candy through the income effect of a price change
C)shift the demand curve for candy
D)have no effect on the demand for candy, because income is assumed constant along a demand curve
E)affect quantity demanded only if candy is a normal good

Question 27

The effect of a decrease in the price of personal computers, other thingsconstant, is likely to be best represented by which of the following?

A)a leftward shift of the demand curve
B)a movement leftward along the demand curve
C)a rightward shift of the demand curve
D)a movement rightward along the demand curve
E)a rightward shift of the supply curve

Question 28

If income rises and a good is inferior, then demand for that good willdecrease.

Question 29

A decrease in demand for a good could mean that

A)consumers are willing to pay a higher price for each quantity of the good
B)consumers are willing to buy larger quantities of the good at each price
C)the demand curve has undergone a parallel shift to the right
D)the demand curve has undergone a nonparallel shift to the right
E)the demand curve has shifted to the left

Question 30

If a decrease in the price of a good causes a rightward shift of the demandcurve for that good, then it is an inferior good.

Question 31

The slope of the demand curve for a normal good must be positive.

Question 32

There are three consumers in the market for playing cards: Don, John, andRon.At a price of $2 per pack, the quantities demanded by each are 3, 2,and 1, respectively.At a price of $1.50 per pack, the quantities demandedby each are 4, 5, and 3, respectively.Which of the following is true?

A)The market demand curve for playing cards does not obey the law of demand.
B)The price decrease causes the quantity demanded in this market to increase by 6.
C)The price decrease causes John's demand curve to shift the most.
D)At a price of $1 per pack, the quantity demanded in this market must be 20.
E)Don's behavior does not obey the law of demand.

Question 33

Which of the following is most likely to be an inferior good?

A)airline travel
B)restaurant meals
C)a subscription to the Wall Street Journal
D)soft drinks
E)used clothing

Question 34

If we say that demand has increased, we mean that there has been

A)a leftward movement along the demand curve
B)a rightward movement along the demand curve
C)a leftward shift of the demand curve
D)a rightward shift of the demand curve
E)an increase in the slope of the demand curve

Question 35

A decrease in the price of a good will cause a leftward shift of the demandcurve, if it is a normal good.

Question 36

If demand for personal computers increases as a result of an increase inincome,

A)personal computers must be a normal good
B)personal computers must be an inferior good
C)personal computers must be a complement
D)the substitutes for personal computers must be inferior goods
E)the substitution effect is larger than the income effect

Question 37

Which of the following statements about demand is true?

A)Since most college students want a Mercedes sports coupe, their demand for it is high.
B)If price increases, the demand curve shifts to the right.
C)The demand curve for bacon will not shift when the price of bacon changes.
D)If a supply curve shifts, thereby changing the price, the demand curve will shift as well.
E)If a demand curve shifts, the supply curve will shift as well, whether or not the price changes.

Question 38

Studies show that the demand curve for peas has shifted.Which of thefollowing explanations would you reject first?

A)The price of string beans has changed.
B)The demand for corn has changed.
C)The demand for string beans has changed.
D)The income of consumers has changed.
E)The price of peas has changed.

Question 39

A demand curve usually has a

A)negative slope because price and quantity demanded are inversely related
B)negative slope because as price rises, demand falls
C)positive slope because price and quantity demanded are positively related
D)positive slope because price and quantity demanded are inversely related
E)slope of zero because there is no change along a demand curve when everything else is held constant

Question 40

A rightward shift of a demand curve represents a decrease in demand.

Question 41

Which of the following is the best example of complements?

A)milk and cheese
B)coffee and tea
C)CDs and DVDs
D)hiking boots and athletic shoes
E)film and film processing (developing)

Question 42

If good B is a complement to good A, then a decrease in the price of B

A)increases the quantity demanded of A
B)decreases the demand for A
C)increases the demand for A
D)decreases the quantity demanded of A
E)will cause the demand for B to increase

Question 43

Which of the following is the best example of substitutes?

A)coffee and cream
B)videotapes and VCRs
C)money and biscuits
D)tortillas and salsa
E)hiking boots and athletic shoes

Question 44

In the case of a normal good, an increase in consumers' incomes would shiftthe

A)demand curve inward
B)supply curve inward
C)supply curve outward
D)supply and demand curves inward
E)demand curve outward

Question 45

If a decrease in the price of good A causes an increase in the demand forgood B, then A and B must be complements.

Question 46

If the price of vanilla ice cream decreases, it is likely that

A)demand for vanilla ice cream will increase
B)demand for vanilla ice cream will decrease
C)demand for chocolate ice cream will increase
D)demand for chocolate ice cream will decrease
E)the quantity demanded of vanilla ice cream will decrease

Question 47

Sugar and honey are viewed as substitutes for each other in many cookingapplications.If the price of sugar rises, we would expect

A)the demand for honey to increase
B)the demand for honey to decrease
C)the quantity demanded of honey to decrease
D)the price of honey to decrease
E)the quantity demanded of honey to increase

Question 48

Which of the following will cause the demand curve for a normal good toshift to the right?

A)a decrease in income
B)an increase in the price of a complementary good
C)a decrease in the price of the good
D)an increase in the price of a substitute good
E)an expectation of a future price decline

Question 49

Which of the following might cause the demand for ice cream, a normalgood, to increase?

A)an increase in the price of ice cream
B)an increase in the price of sherbet
C)cooler weather
D)a decrease in the number of consumers
E)a decrease in consumer income

Question 50

Which of the following will cause the demand curve for gasoline to shiftleftward?

A)a decrease in the price of gasoline
B)an increase in the price of gasoline
C)a leftward shift of the supply of gasoline
D)a rightward shift of the supply of cars
E)a decrease in the price of bicycles

Question 51

Tax preparation services and IRS tax publications can be consideredsubstitutes.

Question 52

)If the price of potato chips increases, other things constant, demand forpotato­chip dip will

A)not change; only quantity demanded will change
B)increase because the goods are substitutes
C)decrease because the goods are substitutes
D)decrease because the goods are complements
E)increase because the goods are complements

Question 53

A decrease in the demand for peanut butter could be caused by a(n)

A)increase in the supply of peanut butter
B)increase in the price of peanut butter
C)doubling of the price of bread
D)drought in Georgia that destroyed 30 percent of the peanut crop
E)increase in consumer income

Question 54

As the price of ballpoint pens increases, the demand for felt­tip pens can beexpected to decrease.

Question 55

Two goods are considered substitutes only if a(n)

A)decrease in the demand for one leads to a decrease in the supply of the other
B)increase in the demand for one leads to a decrease in the supply of the other
C)increase in the price of one leads to an increase in the demand for the other
D)decrease in the price of one leads to an increase in the demand for the other
E)decrease in the supply of one leads producers to switch to production of the other

Question 56

If the price of gasoline (a normal good) decreases, other things constant,

A)the demand for gasoline increases
B)the demand for gasoline decreases
C)the quantity demanded of gasoline increases
D)the quantity demanded of gasoline decreases
E)neither the demand for gasoline nor the quantity demanded of gasoline changes because everything is
Assumed constant along a demand curve

Question 57

An increase in the price of butter, a substitute good, would be most likely tocause

A)a rightward shift of the demand curve for margarine
B)a leftward shift of the demand curve for margarine
C)the quantity of margarine demanded to increase
D)the quantity of margarine demanded to decrease
E)a decrease in the price of margarine

Question 58

If the price of a haircut (a normal good) increases, other things constant, the

A)demand for haircuts increases
B)demand for haircuts decreases
C)quantity demanded of haircuts decreases
D)quantity demanded of haircuts increases
E)demand for haircuts, or quantity demanded of haircuts decreases; they are the same thing

Question 59

The difference between normal and inferior goods is that

A)normal goods are of better quality than inferior goods
B)an increase in price will shift the demand curve for a normal good rightward and the demand curve for an
Inferior good leftward
C)if the price of a normal good increases, individuals who buy it are poorer; for inferior goods, the opposite
Is true
D)an inferior good is something that will not be demanded until quantities of the normal good have
Been exhausted
E)an increase in income will shift the demand curve for a normal good rightward and the demand curve for
An inferior good leftward

Question 60

If good B is a complement to good A, then a rise in the price of B

A)increases the quantity demanded of A
B)decreases the demand for A
C)increases the demand for A
D)decreases the quantity demanded of A
E)will cause the demand for B to increase

Question 61

If demand decreases, then quantity supplied will increase.

Question 62

Supply curves generally slope upward because of all of the followingreasons except one.Which is the exception?

A)Producers are willing to offer more of a good at higher prices.
B)A higher price attracts resources from less­valued uses.
C)Producers must be compensated for the rising opportunity cost of additional output.
D)Producers have a greater incentive to sell more as the price increases.
E)The price of a good usually must fall to induce an increase in quantity supplied.

Question 63

An increase in the demand for peanut butter could be caused by a(n)

A)decrease in consumer income
B)increase in the supply of peanut butter
C)decrease in the price of bread
D)drought in Georgia that destroyed 30 percent of the peanut crop
E)decrease in the price of bologna

Question 64

Which of the following would not shift the demand curve for pork?

A)an increase in the price of beef
B)an increase in the price of pork
C)an increase in the incomes of pork consumers
D)a widespread advertising campaign for pork
E)a finding that consumption of beef increases the risk of heart attack

Question 65

Which of the following is the reason supply curves typically slope upward?

A)Opportunity cost of production increases as quantity supplied increases.
B)Supply increases as opportunity cost decreases.
C)Price increases as supply decreases.
D)Quantity supplied is unrelated to price.
E)The income and substitution effects of a price change.

Question 66

A leftward shift of a supply curve represents a decrease in supply.

Question 67

Which of the following would not cause the demand curve for peaches toshift?

A)an increase in the price of apricots
B)a decrease in the price of nectarines
C)an increase in the price of peaches
D)a change in preferences for peaches
E)a decrease in the income of peach buyers

Question 68

A change in the composition of the population will generally

A)change demand only if there is a change in the size of the population
B)change demand only if there is no change in the size of the population
C)change demand even if there is no change in the size of the population
D)have absolutely no effect on demand
E)result in a movement along the demand curve

Question 69

Which of the following events is likely to reduce the demand for on­campusstudent housing?

A)a rise in rents for off­campus housing
B)more students enrolling at the university
C)it becomes less fashionable to live "on campus"
D)a rise in dorm fees
E)a rise in the incomes of students

Question 70

Assume that black beans and rice are staples in the diet of one particularfamily.How could you tell if these goods were complements, substitutes, orunrelated goods?

A)If the price of black beans rose and the consumption of rice remained the same, they would be substitutes.
B)If the price of black beans rose and the consumption of rice increased, they would be substitutes.
C)If the price of black beans rose and the consumption of rice decreased, they would be substitutes.
D)If the price of black beans rose and the consumption of both goods remained the same, they would be
Complements.
E)There is no way to determine whether these goods are complements, substitutes, or unrelated goods.

Question 71

Which of the following is true of an increase in quantity supplied of a givengood?

A)It is represented by a rightward shift in the supply curve.
B)It could result from a technological improvement.
C)The price of a key resource used to produce the good may have decreased.
D)It is caused by an increase in the price of the good.
E)The price of an alternative good has increased.

Question 72

Which of the following would be most likely to increase the demand fordowntown parking in a large city?

A)improved bus service to the downtown area
B)lower downtown parking fees
C)more downtown parking lots
D)more freeways leading to the downtown area
E)a major employer moves to the suburbs

Question 73

Jennifer learns that the price of CDs will be going up 10 percent next week.She usually buys three CDs per week.What happens to Jennifer's demandfor CDs this week?

A)It does not change because only quantity demanded changes when price changes.
B)It increases because the price will be lower next week.
C)It decreases because the price will be higher next week.
D)It increases because the price will be higher next week.
E)It decreases because the price will be lower next week.

Question 74

As the baby boom ended, fewer families had young children and, as aconsequence, the

A)demand curve for preschool services shifted outward
B)demand curve for preschool services shifted inward
C)supply curve for preschool services shifted outward
D)supply curve for preschool services shifted inward
E)supply and demand curves for preschool services remained constant

Question 75

If supply increases, then quantity demanded decreases.

Question 76

Producers are willing and able to offer greater quantities for sale at higherprices because

A)they have the incentive to pay the increasing opportunity cost of resources to attract them from
Alternative uses
B)they will decrease their profits by expanding production at higher prices
C)the government orders them to do so
D)lower prices attract new firms, which have higher costs of production
E)they hire superior quality, higher­priced resources as production expands

Question 77

.A decrease in the price of peanut butter will cause a leftward shift of thesupply curve of peanut butter.

Question 78

Which of the following best defines supply?

A)the amount of a good that producers want to sell at a particular price
B)the amount of a good that consumers will buy
C)the amount of a good that producers are willing and able to sell at each possible price, other things constant
D)the amount of a good that producers are willing to sell at each possible price, other things constant
E)the amount of a good that producers are willing and able to buy at each possible price, other things
Constant

Question 79

If a certain type of clothing becomes more fashionable, we would expectthat its price

A)will decrease and quantity will remain constant
B)and quantity will both decrease
C)will increase and quantity will decrease
D)will decrease and quantity will increase
E)and quantity will both increase

Question 80

Which of the following is true of the relationship between price and quantitysupplied?

A)There is always an inverse relationship.
B)More is supplied at lower prices.
C)Producers work harder and sell more when the price decreases.
D)There is a direct relationship between price and quantity supplied.
E)It is always true that a higher price leads to a decrease in quantity supplied.