Deck 3: Demand, Supply, and the Determination of Price

Question 1

A buyer's demand for a good or service is influenced by the:

A) buyer's income.
B) price of the good or service.
C) availability of substitute products.
D) all of the above.

Answer 1

all of the above.

Question 2

A buyer's demand for a product refers to the amounts of the product the buyer would purchase at different:

A) prices.
B) income levels.
C) points in time.
D) all of the above.

Answer 2

prices.

Question 3

When developing a demand schedule, nonprice factors such as buyer taste are held constant because:

A) these factors rarely change.
B) these factors have no effect on buyers' attitudes toward products.
C) there is not enough information about any of these factors to work with them.
D) a demand schedule focuses on how a product's price influences the amount buyers would purchase.

Answer 3

a demand schedule focuses on how a product's price influences the amount buyers would purchase.

Question 4

A demand schedule:

A) typically indicates that the quantity of a product demanded increases as its price increases.
B) indicates the amounts of a product a buyer would purchase at different prices in a defined time period.
C) only illustrates buying plans of individuals in households; buying plans of
D) all of the above.

Question 5

The different amounts of a product that a buyer would purchase at different prices in a defined time period when all nonprice factors are held constant is illustrated by:

A) a demand reaction function.
B) a demand schedule and curve.
C) the laws of demand and supply.
D) all of the above.

Question 6

According to the Law of Demand:

A) more of a product will be demanded when buyers' incomes increase.
B) a decrease in a product's price will cause the product's demand curve to shift to the right.
C) there is a direct relationship between a change in a product's price and a change in the quantity demanded.
D) there is an inverse relationship between a change in a product's price and a change in the quantity demanded.

Question 7

The Law of Demand focuses on changes in the amount of a good or service demanded that are caused by changes in:

A) the price of the good or service.
B) nonprice factors, such as buyer's income, or substitute products.
C) the time period under consideration; for example, a week versus a month.
D) all of the above.

Question 8

According to the Law of Demand, an increase in the price of Good X will cause:

A) a decrease in the demand for Good X.
B) no change in the quantity of Good X demanded.
C) a decrease in the quantity of Good X demanded.
D) an increase in the quantity of Good X demanded.

Question 9

According to the Law of Demand, a decrease in the price of a product will cause its quantity demanded to:

A) increase.
B) decrease.
C) increase or decrease, depending on how much the price falls.
D) decrease at first and then return to its original level because of the influence of nonprice factors affecting buyers.

Question 10

The Law of Demand indicates that:

A) price and quantity demanded are inversely related.
B) consumers will purchase more of a product at a higher price than at a lower price.
C) an increase in the number of buyers in a market will increase the demand for a product.
D) all of the above.

Question 11

The Law of Demand:

A) indicates how buyers react to changes in all factors affecting their purchasing decisions.
B) is a result of limited incomes and buyers' abilities to substitute one product for another.
C) states that changes in the price of a product and changes in the amount demanded are directly related.
D) all of the above.

Question 12

The Law of Demand:

A) is a result of buyers' limited incomes and their abilities to substitute one product for another.
B) does not indicate how the number of buyers or their tastes affect the demand for a product.
C) states that changes in the price of a product and changes in the amount demanded are inversely related.
D) all of the above.

Question 13

Typically, less of a product is demanded as its price goes up because:

A) buyers' incomes are limited.
B) buyers lose interest in the product when its price goes up.
C) suppliers offer less of the product for sale at higher prices.
D) buyers are quick to recognize when the price of a product is higher than its value.

Question 14

One reason buyers demand less of a product as its price increases is:

A) substitute goods are usually available.
B) high-priced goods place buyers in higher tax brackets.
C) buyers must save more of their incomes as prices increase.
D) sellers offer less of the product for sale as its price increases.

Question 15

The Law of Demand:

A) can be explained by buyers having limited incomes with which to purchase a good or service.
B) can be explained by buyers having alternative products from which to choose when making a purchasing decision.
C) states that there is an inverse relationship between a product's price and the amount of that product buyers will demand.
D) all of the above.

Question 16

If the price of a good or service increases and all nonprice factors are held constant, quantity demanded will:

A) increase.
B) decrease.
C) not change.
D) change in a way that cannot be determined from the given information.

Question 17

Which of the following explains why consumers purchase less of a good or service when its price increases?

A) A limited income from which purchases can be made.
B) The availability of substitute goods or services.
C) Both of the above.
D) None of the above.

Question 18

A demand curve for a good or service is shown on a graph that has:

A) price on the vertical axis, quantity on the horizontal axis, and the curve is upward sloping.
B) price on the vertical axis, quantity on the horizontal axis, and the curve is downward sloping.
C) quantity on the vertical axis, price on the horizontal axis, and the curve is upward sloping.
D) quantity on the vertical axis, price on the horizontal axis, and the curve is downward sloping.

Question 19

You are given the following price-quantity information: ($10 and 180 units), ($15 and 150 units), ($20 and 120 units). This information would graph as:

A) an upward-sloping line and conform to the Law of Supply.
B) a downward-sloping line and conform to the Law of Supply.
C) an upward-sloping line and conform to the Law of Demand.
D) a downward-sloping line and conform to the Law of Demand.

Question 20

Because of the Law of Demand, demand curves:

A) slope upward.
B) slope downward.
C) are perfectly vertical.
D) are perfectly horizontal.

Question 21

Which of the following statements about demand is FALSE?

A) Demand curves are downward sloping.
B) The demand curve for a product will shift to the left as its price rises.
C) The Law of Demand occurs because people's incomes are limited and there are substitute goods available.
D) There is an inverse relationship between the change in a product's price and the change in its quantity demanded.

Question 22

The different amounts of a product that a seller would make available at different prices in a defined time period when all nonprice factors are held constant is:

A) supply.
B) demand.
C) the Law of Supply.
D) the Law of Demand.

Question 23

When constructing a supply schedule for a firm's product, each of the following is held constant EXCEPT the:

A) price of the product itself.
B) cost of producing the product.
C) seller's expectations about future prices.
D) prices of other products the seller could produce.

Question 24

A supply schedule shows:

A) that price and quantity supplied are inversely related.
B) the different amounts of a product a seller would make available for sale at different prices.
C) the different amounts of a product a seller would make available for sale at one particular price.
D) that, because of the profit motive, a seller will offer more of a product for sale when its price is low than when its price is high.

Question 25

The Law of Supply states that as the price of a product increases:

A) consumers will buy less of the product.
B) sellers will offer less of the product for sale.
C) sellers will offer more of the product for sale.
D) new buyers will enter the market because the product appears popular.

Question 26

The Law of Supply:

A) is a result of sellers' efforts to meet the wishes of buyers.
B) states that changes in the price of a product and changes in the amount supplied are directly related.
C) is concerned with how the number of sellers in a market affect the supply of a product.
D) all of the above.

Question 27

If the price of a good or service decreases and all nonprice factors are held constant, the quantity supplied will:

A) increase.
B) decrease.
C) be unchanged.
D) change in a way that cannot be determine from the given information.

Question 28

A supply schedule:

A) is based on a seller's ability to cover costs and earn a profit.
B) indicates there is a direct relationship between a product's price and the quantity supplied.
C) indicates the different amounts of a product that a seller would offer for sale at different prices over a defined time period.
D) all of the above.

Question 29

The reason sellers offer more goods or services for sale when price increases is:

A) greater ability to cover costs.
B) greater ability to earn a profit.
C) both of the above.
D) none of the above.

Question 30

A typical supply curve is shown in a graph that has:

A) price on the vertical axis, quantity on the horizontal axis, and the curve is upward sloping.
B) price on the vertical axis, quantity on the horizontal axis, and the curve is downward sloping.
C) quantity on the vertical axis, price on the horizontal axis, and the curve is upward sloping.
D) quantity on the vertical axis, price on the horizontal axis, and the curve is downward sloping.

Question 31

You are given the following price-quantity information: ($20 and 140 units), ($15 and 120 units), ($10 and 80 units). The information would graph as:

A) an upward-sloping line and conform to the Law of Supply.
B) an upward-sloping line and conform to the Law of Demand.
C) a downward-sloping line and conform to the Law of Supply.
D) a downward-sloping line and conform to the Law of Demand.

Question 32

Because of the Law of Supply, supply curves:

A) slope upward.
B) slope downward.
C) are perfectly vertical.
D) are perfectly horizontal.

Question 33

Application 3.1, "The Laws of Demand and Supply,"illustrates:

A) how the laws of demand and supply developed over time.
B) the impact of prices on buyers' and sellers' decisions in travel and milk markets.
C) situations where the laws of demand and supply cannot explain buyers' or sellers' behaviors.
D) how the laws of demand and supply have gone beyond economics and are now used by courts in deciding in favor of plaintiffs or defendants in lawsuits.

Question 34

Market demand is:

A) the total amount of a product demanded by a single buyer at all possible prices.
B) the total amount of a product demanded by all buyers in a market at various prices.
C) represented by an upward-sloping curve because more goods are desired at higher prices than at lower prices.
D) represented by an upward-sloping curve, while the demand by a single buyer is represented by a downward-sloping curve.

Question 35

The market supply of a product:

A) decreases as sellers enter the market.
B) is generally represented by a downward-sloping supply curve.
C) is found by adding together all of the supply schedules of all of the sellers in the market.
D) all of the above.

Question 36

The force that drives a competitive market is the:

A) interaction of all buyers and sellers.
B) power of all buyers combined since they collectively control total market demand.
C) power of all sellers combined since they collectively control total market supply.
D) power of each seller since it is usually larger than any individual buyer.

Question 37

A shortage occurs in a market when quantity demanded is:

A) equal to quantity supplied.
B) less than quantity supplied.
C) more than quantity supplied.
D) none of the above.

Question 38

A surplus occurs in a market when quantity demanded is:

A) equal to quantity supplied.
B) less than quantity supplied.
C) more than quantity supplied.
D) none of the above.

Question 39

If there were a shortage in a market, the quantity of the product demanded would be:

A) less than the quantity supplied, and the price would fall.
B) less than the quantity supplied, and the price would rise.
C) greater than the quantity supplied, and the price would fall.
D) greater than the quantity supplied, and the price would rise.

Question 40

If there were a surplus in a market, the quantity of the product supplied would be:

A) less than the quantity demanded, and the price would fall.
B) less than the quantity demanded, and the price would rise.
C) greater than the quantity demanded, and the price would fall.
D) greater than the quantity demanded, and the price would rise.

Question 41

The expected reaction to a shortage is:

A) an increase in price.
B) an increase in quantity supplied.
C) a reduction in quantity demanded.
D) all of the above.

Question 42

The expected reaction to a surplus is:

A) a reduction in price.
B) an increase in quantity supplied.
C) a reduction in quantity demanded.
D) all of the above.

Question 43

Which of the following is an expected reaction to a shortage?

A) An increase in price.
B) A decrease in quantity supplied.
C) An increase in quantity demanded.
D) All of the above.

Question 44

Which of the following is an expected reaction to a surplus?

A) A decrease in price.
B) A decrease in quantity supplied.
C) An increase in quantity demanded.
D) All of the above.

Question 45

The expected reaction to a shortage is a reduction in:

A) price.
B) quantity supplied.
C) quantity demanded.
D) all of the above.

Question 46

The expected reaction to a surplus is an increase in:

A) price.
B) quantity supplied.
C) quantity demanded.
D) all of the above.

Question 47

Equilibrium price and equilibrium quantity are the price and quantity:

A) where demand equals supply in a market.
B) toward which a free market automatically moves.
C) both of the above.
D) none of the above.

Question 48

The term "market clearing price"is used to identify:

A) a price that is so low that it drives sellers out of the market.
B) a price that is so high that it drives buyers out of the market.
C) the price at which quantity demanded equals quantity supplied in a market.
D) none of the above.

Question 49

A shortage develops when a product's price is:

A) less than the equilibrium price, and quantity demanded is less than quantity supplied.
B) less than the equilibrium price, and quantity demanded is more than quantity supplied.
C) greater than the equilibrium price, and quantity demanded is less than quantity supplied.
D) greater than the equilibrium price, and quantity demanded is more than quantity supplied.

Question 50

A surplus occurs when a product's price is:

A) less than the equilibrium price, and quantity demanded is less than quantity supplied.
B) less than the equilibrium price, and quantity demanded is more than quantity supplied.
C) greater than the equilibrium price, and quantity demanded is less than quantity supplied.
D) greater than the equilibrium price, and quantity demanded is more than quantity supplied.

Question 51

A shortage will develop when a product's price is:

A) equal to the equilibrium price.
B) less than the equilibrium price.
C) greater than the equilibrium price.
D) none of the above.

Question 52

A surplus occurs when the price charged in a market is:

A) zero.
B) the equilibrium price.
C) above the equilibrium price.
D) below the equilibrium price.

Question 53

When a product's price is greater than the equilibrium price we should expect:

A) a surplus.
B) a shortage.
C) market supply to equal market demand.
D) none of the above.

Question 54

When a product's price is less than the equilibrium price we should expect:

A) a surplus.
B) a shortage.
C) market demand to equal market supply.
D) none of the above.

Question 55

If the price charged in a market were $10 and the equilibrium price in that market were $8, you would expect:

A) prices to behave in no predictable way.
B) the equilibrium price to increase to $10.
C) the price charged in the market to decrease to $8.
D) both the price charged and the equilibrium price to remain unchanged.

Question 56

If the price charged in a market was $7 and the equilibrium price in that market was $11, you would expect:

A) price to behave in no predictable way.
B) the equilibrium price to fall to $7.
C) the price charged in the market to increase to $11.
D) both the equilibrium price and the price charged to remain unchanged.

Question 57

At a price of $50 a ticket, the local hockey team discovers that there are many empty seats. This is evidence that:

A) the current price should be raised.
B) a shortage exists at the current price.
C) the equilibrium price is higher than $50.
D) the current price is higher than the equilibrium price.

Question 58

In the table, P = price, Qs = quantity supplied, and Qd equals quantity demanded.


-A surplus will develop in this market when price is:

A) $4.
B) $5.
C) $6.
D) $7.

Question 59

In the table, P = price, Qs = quantity supplied, and Qd equals quantity demanded.


-A shortage will develop in this market when price is:

A) $5.
B) $6.
C) $7.
D) $8.

Question 60

Given the following supply and demand schedules, equilibrium will be reached when:

A) price = $4.
B) price = $6.
C) price = $8.
D) this market cannot reach equilibrium.

Question 61

A surplus of a product in a market signals that the price charged in the market is:

A) above the equilibrium price, and the quantity demanded is less than the quantity supplied.
B) below the equilibrium price, and the quantity demanded is less than the quantity supplied.
C) above the equilibrium price, and the quantity demanded is greater than the quantity supplied.
D) below the equilibrium price, and the quantity demanded is greater than the quantity supplied.

Question 62

A shortage of a product in a market signals that the price charged in the market is:

A) above the equilibrium price, and the quantity demanded is less than the quantity supplied.
B) below the equilibrium price, and the quantity demanded is less than the quantity supplied.
C) above the equilibrium price, and the quantity demanded is greater than the quantity supplied.
D) below the equilibrium price, and the quantity demanded is greater than the quantity supplied.

Question 63

-If producers in this market charged a price of $6, there would be a:

A) surplus of 200 units.
B) surplus of 400 units.
C) shortage of 100 units.
D) shortage of 200 units.

Question 64

-If producers in this market charged a price of $2, there would be:

A) a surplus of 200 units.
B) a surplus of 300 units.
C) a shortage of 300 units.
D) no surplus or shortage.

Question 65

-There would be no surplus or shortage in this market if producers charged a price of:

A) $2.
B) $4.
C) $6.
D) $8.

Question 66

-The equilibrium price and quantity in this market are:

A) $0 and 0 units, respectively.
B) $50 and 60 units, respectively.
C) $60 and 50 units, respectively.
D) none of the above.

Question 67

-At a price of $100 per unit there would be a:

A) surplus of 50 units.
B) surplus of 70 units.
C) shortage of 20 units.
D) shortage of 50 units.

Question 68

-At a price of $40 per unit there would be a:

A) surplus of 80 units.
B) shortage of 40 units.
C) shortage of 80 units.
D) none of the above.

Question 69

-At a price of $50 per unit there would be a:

A) surplus and sellers would bid the price down.
B) surplus and buyers would bid the price down.
C) shortage and sellers would bid the price down.
D) shortage and buyers and sellers would bid the price up.

Question 70

-At a price of $80 per unit there would be a:

A) surplus of 25 units and the price charged would fall.
B) shortage of 25 units and the price charged would rise.
C) surplus of 25 units and the equilibrium price would rise.
D) none of the above.

Question 71

-At what price would there be a shortage of 20 units?

A) $50.
B) $60.
C) $70.
D) $75.

Question 72

-At what price would there be a surplus of approximately 40 units?

A) $50.
B) $80.
C) $90.
D) Over $100.

Question 73

Changes in the quantity supplied of a good or service are caused by changes in the:

A) price of the good or service.
B) number of sellers in the market.
C) cost of inputs, i.e. wages, rents, and interest.
D) time period under consideration, i.e. a week versus a month.

Question 74

A change in the quantity demanded of a product is:

A) caused by a change in buyers' incomes.
B) caused by a change in the number of buyers in the market.
C) represented by a movement along the product's demand curve.
D) represented by a shift of the product's demand curve to the right or left.

Question 75

A decrease in demand means that:

A) the demand curve for a product has shifted to the left.
B) the demand curve for a product has shifted to the right.
C) buyers have moved upward along a stable demand curve.
D) buyers have moved downward along a stable demand curve.

Question 76

A change in the demand for a product would NOT be caused by a change in the:

A) price of the product.
B) incomes of the buyers.
C) popularity of the product.
D) price of a substitute product.

Question 77

A change in the demand for a product:

A) is caused by a change in the price of the product.
B) refers to a shift of the product's demand curve to the right or left.
C) refers to a movement from one price-quantity point to another on the demand curve for the product.
D) all of the above.

Question 78

Which of the following would cause an increase in the demand for a product?

A) New buyers coming into the market.
B) Expectations of higher prices in the future.
C) Increases in the prices of substitute products.
D) All of the above.

Question 79

Which of the following would cause the demand curve for a product to shift to the right today?

A) A decrease in the price of the product.
B) The expectation that the product will be unavailable in the future.
C) The expectation that the price of the product will be lower in the future.
D) All of the above.

Question 80

Which of the following would NOT lead to an increase in the demand for a product?

A) A decrease in the product's price.
B) An increase in the number of buyers in the market.
C) An increase in the price of a product that competes with this product.
D) A decrease in the quality of a product that competes with this product.