Deck 3: Demand and Supply 

Question 1

Your demand for DVD's is

A) the number of DVD's you would like to have if they were available at no charge.
B) the number of DVD's you would purchase at today's price.
C) the number of DVD's you would purchase at various prices.
D) dependent on the supply of DVD's.

Answer 1

the number of DVD's you would purchase at various prices.

Question 2

The positive slope of the demand curve reflects the fact that

A) higher prices reduce the quantity demanded.
B) higher prices increase the quantity demanded.
C) higher prices reduce the quantity supplied.
D) higher prices increase the quantity supplied.

Answer 2

higher prices reduce the quantity demanded.

Question 3

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

A) Income
B) Tastes and preferences
C) Prices of related goods
D) The number of producers in the market

Answer 3

The number of producers in the market

Question 4

How would a decrease in the price of DVD players affect the demand for DVD rentals?

A) It would decrease the demand for DVD rentals.
B) It would increase the demand for DVD rentals.
C) It would increase the quantity of DVD rentals demanded without changing the demand.
D) It would decrease the quantity of DVD rentals demanded without changing the demand.

Question 5

The demand curve is downward sloping because

A) price and quantity have a direct relationship.
B) price and quantity have an inverse relationship.
C) price is always constant.
D) demand is based on supply.

Question 6

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

A) It decreases the demand for cornflakes.
B) It decreases the quantity of cornflakes demanded.
C) It increases the supply of cornflakes.
D) Neither the demand nor the supply will change, but the quantity demanded will increase.

Question 7

Suppose that air fares to Hawaii increase. What effect does this have on the market for hotel rooms in Hawaii?

A) It increases the demand for hotel rooms.
B) It decreases the demand for hotel rooms.
C) It increases the supply of hotel rooms.
D) It decreases the supply of hotel rooms.

Question 8

If dry cleaners increase the fees for cleaning services, economic theory predicts that

A) the supply of dry cleaning services will increase, but demand will remain constant.
B) the supply of dry cleaning services will decrease, but demand will remain constant.
C) demand will remain unchanged, but the quantity of cleaning services demanded falls.
D) the quantity of cleaning services demanded remains unchanged, but the demand falls.

Question 9

A demand schedule holds

A) price constant.
B) quality constant.
C) quantity constant.
D) equilibrium constant.

Question 10

Which one of the following statements is FALSE?

A) There is an inverse relationship between product price and quantity demanded.
B) The equilibrium price is the price that clears the market.
C) The substitution and income effects account for the downward slope of the demand curve.
D) For any given product, the slope of the supply curve will match the slope of the demand curve.

Question 11

Suppose that most consumers consider ice cream and frozen yogurt to be substitutes for one another. How is the market for ice cream affected by an increase in the price of frozen yogurt?

A) The demand for ice cream increases.
B) The quantity of ice cream demanded increases, but the demand is unchanged.
C) The supply of ice cream decreases.
D) The quantity of ice cream supplied decreases.

Question 12

Which of the following statements is FALSE?

A) If there is an increase in the demand for a product, consumers want to buy more of the product at each and every possible price.
B) A decrease in demand shifts the demand curve leftward toward the origin, while a decrease in quantity demanded involves a movement upward along a particular demand curve.
C) If the price of a good rises, the quantity demanded of the good decreases and the demand curve shifts toward the origin.
D) A change in the demand for a product is caused by factors other than changes in the product's price.

Question 13

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

A) an increase in the demand for chicken.
B) a decrease in the demand for chicken.
C) an outward shift of the supply curve for both beef and chicken.
D) an inward shift of the supply curve for both beef and chicken.

Question 14

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

A) increase the demand for bagels.
B) decrease the demand for bagels.
C) increase the demand for cream cheese.
D) decrease the demand for cream cheese.

Question 15

What is the equilibrium price of a good?

A) The price that all consumers are happy with.
B) The price that all producers are happy with.
C) The price that clears the market.
D) The price that the average consumer can afford.

Question 16

The equilibrium price of a good is determined by

A) the intersection of supply and demand.
B) popular vote.
C) top industry executives.
D) economic advisers.

Question 17

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

A) It decreased the demand for French wine.
B) It increased the demand for French wine.
C) It decreased the supply of French wine.
D) It increased the supply of French wine.

Question 18

The market demand for cotton clothing shifts to the right when

A) cotton clothing becomes less popular.
B) the supply of cotton decreases.
C) more consumers enter the market for cotton clothing.
D) the price of cotton decreases.

Question 19

All of the following will affect the position of the demand curve EXCEPT

A) income.
B) tastes and preference.
C) prices of substitute goods.
D) prices of resources used to produce the product.

Question 20

If two goods are substitutes, then

A) an increase in the price of one causes a decrease in demand for the other.
B) an increase in the price of one causes a decrease in supply of the other.
C) a decrease in the price of one causes a decrease in demand for the other.
D) a decrease in the supply of one increases demand for the other.

Question 21

After a decrease in the price of CDs, Samia buys fewer cassette tapes and purchases a new CD player. For Samia,

A) CD players and cassette tapes are complements.
B) CDs, CD players, and cassette tapes are all complements.
C) CDs, cassette tapes, and CD players are all substitutes.
D) CDs and cassette tapes are substitutes, and CDs and CD players are complements.

Question 22

An increase in demand for a good can be caused by

A) an increase in the price of a substitute good.
B) an increase in the price of the good itself.
C) an increase in the price of a complement good.
D) a decrease in supply of the good.

Question 23

We observe that people buy less seafood and more steak when the relative price of steak decreases. This indicates that steak and seafood are

A) substitutes.
B) complements.
C) not scarce.
D) in surplus.

Question 24

What is true at prices above the equilibrium price for a product?

A) A shortage results.
B) A surplus results.
C) The good is no longer scarce.
D) The quantity demanded exceeds the quantity supplied.

Question 25

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

A) in shortage.
B) in surplus.
C) substitute goods.
D) complement goods.

Question 26

Two goods are substitutes when

A) the more you have of one, the more you want the other.
B) the more you buy of one, the less you buy of the other.
C) the two goods are used together.
D) the two goods have the same price.

Question 27

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

A) Household income
B) Tastes and preferences
C) The state of technology
D) Prices of related goods

Question 28

Which of the following will cause an increase in the demand for electricity?

A) A decrease in the costs of generating electric power
B) An improvement in the technology of generating electric power
C) A decrease in the price of electric appliances
D) All of the above

Question 29

Which of the following will cause an increase in the supply of new homes?

A) Lower wages for construction workers
B) Lower interest rates for home buyers
C) Higher land prices
D) An influx of new home buyers in the area

Question 30

The positive slope of the supply curve tells us that

A) input prices have no effect on the supply of a good.
B) firms respond to a higher price of their product by increasing the quantity supplied.
C) firms disregard the law of demand.
D) taxes do not affect the cost of producing a good.

Question 31

If the price of a product increases, we would expect

A) quantity supplied to increase.
B) the supply curve to shift left.
C) the supply curve to shift right.
D) an increase in quantity demanded.

Question 32

Which one of the following would cause a rightward shift of the supply curve?

A) A new tax is imposed on production of the good.
B) Some firms that have been producing the good go out of business.
C) There is an increase in demand for the good.
D) Firms producing the good find ways of lowering their production costs.

Question 33

If other things are held constant, an increase in wages earned by workers in the steel industry will cause

A) the demand for steel to increase.
B) the demand for steel to decrease.
C) the supply of steel to increase.
D) the supply of steel to decrease.

Question 34

Which one of the following is TRUE?

A) An increase in supply causes an increase in demand.
B) An increase in supply causes a decrease in demand.
C) An increase in price causes an increase in supply.
D) An increase in price causes an increase in quantity supplied.

Question 35

Which one of the following is TRUE?

A) An increase in demand causes a decrease in supply.
B) An increase in price causes a decrease in supply.
C) An increase in taxes on production of a good causes a decrease in supply.
D) An increase in consumer incomes causes a decrease in supply.

Question 36

Which of the following variables will change in response to a change in price?

A) Supply
B) Demand
C) Consumer preferences
D) Quantity demanded

Question 37

Which of the following will shift the supply curve to the right?

A) Input prices rise.
B) Sales taxes increase.
C) There is an increase in the number of firms producing the good.
D) There is an increase in the number of consumers in the market.

Question 38

Which one of the following variables will change in response to a change in price?

A) Supply
B) Quantity supplied
C) Production costs for a given quantity of output
D) The opportunity cost of producing a given quantity of output

Question 39

What condition characterizes a surplus?

A) Quantity supplied exceeds quantity demanded.
B) Quantity demanded exceeds quantity supplied.
C) Producers are unhappy with the price.
D) Consumers are unhappy with the price.

Question 40

What condition characterizes a shortage?

A) Quantity supplied exceeds quantity demanded.
B) Quantity demanded exceeds quantity supplied.
C) Producers are unhappy with the price.
D) Consumers are unhappy with the price.

Question 41

Table 3.2


-According to Table 3.2, at a price of $8 per unit,

A) equilibrium will be established.
B) a surplus of 120 units will exist on the market.
C) a surplus of 100 units will exist on the market.
D) a shortage of 80 units will exist on the market.

Question 42

Table 3.2


-According to the market data in Table 3.2, which price will generate a shortage of 50 units?

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

Question 43

Table 3.2


-According to the market data in Table 3.2, which price will generate a surplus of 50 units?

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

Question 44

Table 3.2


-What is the equilibrium price for the market described in Table 3.2?

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

Question 45

Table 3.2


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

A) 90
B) 60
C) 30
D) 0

Question 46

Which one of the following is TRUE?

A) An increase in demand leads to a decrease in supply.
B) An increase in supply leads to a decrease in demand.
C) Firms supply more of a product when its price rises.
D) Scarcity is eliminated as firms supply more of a good.

Question 47

How can you determine the amount of a shortage that exists at a particular price?

A) By finding out how many firms want to produce at that price
B) By finding out how many consumers want to buy at that price
C) By knowing what the equilibrium price is
D) By measuring the difference between quantity demanded and quantity supplied at that price.

Question 48

What will happen when the price of a good is held below its equilibrium price?

A) A surplus results.
B) A shortage results.
C) Demand for the good increases.
D) Supply of the good decreases.

Question 49

What will happen when the price of a good is held above its equilibrium price?

A) A surplus results.
B) A shortage results.
C) Demand for the good decreases.
D) Supply of the good increases.

Question 50

Table 3.3


-According to Table 3.3, the equilibrium price for CDs is

A) $16.
B) $14.
C) $12.
D) $10.

Question 51

Table 3.3


-According to Table 3.3, at a price of $16 per CD, there is

A) a surplus of 4500 CDs.
B) a surplus of 3000 CDs.
C) a shortage of 3000 CDs.
D) a shortage of 1500 CDs.

Question 52

Table 3.3


-According to Table 3.3, there is a shortage of 1500 CDs at a price of

A) $14.
B) $12.
C) $10.
D) $8.

Question 53

Table 3.3


-What is the equilibrium quantity in Table 3.3?

A) 2500
B) 3000
C) 3500
D) 4000

Question 54

Suppose that the price of corn is held above its equilibrium price. You would expect to see

A) a surplus of corn on the market.
B) a shortage of corn on the market.
C) a leftward shift of the demand curve because of the high price.
D) a rightward shift of the demand curve because of the easy availability of corn.

Question 55

Demand shows the quantities of a good which consumers will demand at various possible _________ .

Question 56

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

Question 57

The law of _________ asserts that consumers will purchase smaller quantities of a good when its price is higher.

Question 58

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

Question 59

The real income effect explains why consumers buy less of a good when its _________ rises.

Question 60

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

Question 61

_________ is a condition in which all nominal prices are rising.

Question 62

A demand curve slopes downward to reflect the _________ relationship between quantity demanded and price.

Question 63

The equilibrium price of a good is established by the interaction of _________ and _________.

Question 64

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

Question 65

As you move from point to point down to the right along a demand curve, the price of the good _________ and the quantity demanded _________.

Question 66

An _________ in demand occurs when the demand curve shifts right.

Question 67

A _________ in demand occurs when the demand curve shifts left.

Question 68

A decrease in demand for one good results from a _________ in the price of a substitute good.

Question 69

An increase in demand for one good results from a _________ in the price of a complement good.

Question 70

Along a given demand curve, a lower price leads to a _________ quantity demanded.

Question 71

The law of supply asserts that a higher price leads to a _________ quantity supplied.

Question 72

An increase in the number of firms producing a good will shift the supply curve for that good to the _________.

Question 73

Along a given supply curve, an increase in price leads to a higher _________ _________.

Question 74

The upward slope of the supply curve reflects the _________ relationship between price and quantity supplied.

Question 75

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

Question 76

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

Question 77

What is on the horizontal axis when we plot a supply curve?

Question 78

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

Question 79

What does the law of demand assert about the relationship between price and quantity demanded?

Question 80

What are the two factors that account for the law of demand?