Deck 3: Where Prices Come From: the Interaction of Demand and Supply

Question 1

The market for tablet computers has grown rapidly over the past few years. Following the successful launch of the iPad in 2010 with nearly 20 million sales and growing to 310 million in 2016, companies such as Samsung, Dell, Microsoft, Amazon, Google and many others have all introduced products to compete with the iPad. The tablets introduced to compete with the iPad would be considered:

A)complements to the iPad.
B)substitutes for the iPad.
C)inferior goods compared to the iPad.
D)normal goods compared to the iPad.

Answer 1

substitutes for the iPad.

Question 2

By drawing a demand curve with ________ on the vertical axis and ________ on the horizontal axis, economists assume that the most important determinant of the demand for a good is the ________ of the good.

A)quantity; price; quantity
B)price; quantity; quantity
C)price; quantity; price
D)quantity; price; price

Answer 2

price; quantity; price

Question 3

The 'income effect' of a price change refers to the impact of a change in:

A)income on the price of a good.
B)demand when income changes.
C)the quantity demanded when income changes.
D)the price of a good on a consumer's purchasing power.

Answer 3

the price of a good on a consumer's purchasing power.

Question 4

If a demand curve shifts to the left, then:

A)demand has increased.
B)quantity demanded has increased.
C)demand has decreased.
D)quantity demanded has decreased.

Question 5

When the price of a good increases, consumers buy a smaller quantity because of the ________ effect and the ________ effect.

A)substitution; income
B)normal; inferior
C)substitute; complement
D)price; quantity

Question 6

The demand curve for a good will shift leftward if there is:

A)a change in the technology used to produce the good.
B)an increase in the price of the good.
C)an increase in the price of a complementary good.
D)a decrease in the price of the good.

Question 7

Figure 3.1

Refer to Figure 3.1. An increase in population would be represented by a movement from:

A)A to B.
B)B to A.
C)D₁ to D₂.
D)D₂ to D₁.

Question 8

If an increase in income leads to in an increase in the demand for peanut butter, then peanut butter is a:

A)neutral good.
B)normal good.
C)necessity.
D)complement.

Question 9

If the quantity of chocolate demanded decreases as the price of chocolate increases, economists would describe this as:

A)a decrease in demand.
B)a decrease in quantity demanded.
C)a change in consumer income.
D)a decrease in consumers' taste for chocolate.

Question 10

If the price of grapefruit rises, the substitution effect due to the price change will cause a decrease in the:

A)demand for grapefruit.
B)demand for oranges, a substitute for grapefruit.
C) quantity demanded of grapefruit.
D)quantity supplied of grapefruit.

Question 11

The ________ effect refers to the change in quantity demanded for a good that results from the effect of a change in the good's price on consumers' purchasing power.

A)ceteris paribus
B)population
C)substitution
D)income

Question 12

What is the difference between an 'increase in demand' and an 'increase in quantity demanded'?

A)There is no difference between the two terms; they both refer to a shift of the demand curve.
B)An 'increase in demand' is represented by a rightward shift of the demand curve while an 'increase in quantity demanded' is represented by a movement along a given demand curve.
C)There is no difference between the two terms; they both refer to a movement downward along a given demand curve.
D)An 'increase in demand' is represented by a movement along a given demand curve, while an 'increase in quantity demanded' is represented by a rightward shift of the demand curve.

Question 13

If a demand curve shifts to the right, then:

A)demand has increased.
B)quantity demanded has increased.
C)demand has decreased.
D)quantity demanded has decreased.

Question 14

If the Apple iPad and other tablets are considered substitutes, then, other things equal, a decrease in the price of the iPad will:

A)increase the demand for the iPad.
B)decrease the demand for Microsoft tablets.
C)increase the quantity demanded for Dell tablets.
D)decrease the quantity demanded for the iPad.

Question 15

The demand by all the consumers of a given good or service is the ________ for the good or service.

A)market demand
B)quantity demanded
C)law of demand
D)scheduled demand

Question 16

If the price of orchids falls, the substitution effect due to the price change will cause an increase in the:

A)demand for orchids.
B)demand for roses, a substitute for orchids.
C)quantity demanded of orchids.
D)quantity supplied of orchids.

Question 17

A movement along the demand curve for toothpaste would be caused by a change in:

A)the price of toothbrushes.
B)consumer income.
C)the price of toothpaste.
D)population.

Question 18

A change in which of the following variables will change the quantity demanded for a product:

A)the price of the product.
B)population and demographics.
C)income.
D)tastes.

Question 19

If the demand for higher education increases as incomes increase, then higher education is:

A)a normal good.
B)a neutral good.
C)a necessity.
D)an inferior good.

Question 20

Holding everything else constant, a decrease in the price of tablet computers will result in:

A)a decrease in the quantity of tablet computers supplied.
B)a increase in the demand for tablet computers.
C)a decrease in the demand of tablet computers.
D)a increase in the quantity of tablet computers demanded.

Question 21

Figure 3.1

Refer to Figure 3.1. A decrease in the price of a complementary good would be represented by a movement from:

A)A to B.
B)B to A.
C)D₁ to D₂.
D)D₂ to D₁.

Question 22

If the price of downloadable apps was to decrease, then the:

A)demand for smart phones would decrease.
B)demand for smart phones increase.
C)supply of smart phones would increase.
D)quantity demanded of smart phones would decrease.

Question 23

In January, buyers of gold expect that the price of gold will rise in February. What happens in the gold market in January, holding all else constant?

A)The supply curve shifts to the right.
B)The demand curve shifts to the left.
C)The demand curve shifts to the right.
D)The quantity demanded increases.

Question 24

Suppose that when the price of raspberries increases, Lonnie increases his purchases of papayas. To Lonnie raspberries and papayas are:

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

Question 25

Figure 3.1

Refer to Figure 3.1. A decrease in the price of a substitute good would be represented by a movement from:

A)A to B.
B)B to A.
C)D₁ to D₂.
D)D₂ to D₁.

Question 26

Studies have shown links between increased calcium consumption and a reduction in osteoporosis. How does this affect the market for calcium?

A)The calcium supply curve shifts to the right because of a change in tastes in favour of calcium.
B)The calcium demand curve shifts to the right because of a change in tastes in favour of calcium.
C)The calcium demand curve shifts to the left because this new information will increase the price of calcium.
D)The calcium supply curve shifts to the left because this new information will increase the price of calcium.

Question 27

Figure 3.1

Refer to Figure 3.1. A decrease in the price of the product would be represented by a movement from:

A)A to B.
B)B to A.
C)D₁ to D₂.
D)D₂ to D₁.

Question 28

How does the increasing use of streaming music services affect the market for compact discs?

A)The demand curve for compact discs shifts to the right.
B)The supply curve for compact discs shifts to the left.
C)The supply curve for compact discs shifts to the right.
D)The demand curve for compact discs shifts to the left.

Question 29

With the advent of online classes and e-learning, a new category in the textbook market, the 'virtual rental' book has become a possible substitute to new book purchases. How does the availability of virtual rental books affect the market for new books?

A)The demand curve for new books shifts to the right.
B)The demand curve for new books shifts to the left.
C)The supply curve for new books shifts to the right.
D)The supply curve for new books shifts to the left.

Question 30

In June, buyers of titanium expect that the price of titanium will fall in July. What happens in the titanium market in June, holding everything else constant?

A)The demand curve shifts to the right.
B)The quantity demanded increases.
C)The quantity demanded decreases
D)The demand curve shifts to the left.

Question 31

Figure 3.1

Refer to Figure 3.1. An increase in the expected future price of the product would be represented by a movement from:

A)A to B.
B)B to A.
C)D₁ to D₂.
D)D₂ to D₁.

Question 32

Figure 3.1

Refer to Figure 3.1. If the product represented is a normal good, a decrease in income would be represented by a movement from:

A)A to B.
B)B to A.
C)D₁ to D₂.
D)D₂ to D₁.

Question 33

How is the market for digital photo printing paper affected by technological advancements in the production and quality of digital photography?

A)The demand curve for digital photo printing paper shifts to the right.
B)The demand curve for digital photo printing paper shifts to the left.
C)The supply curve for digital photo printing paper shifts to the right.
D)The supply curve for digital photo printing paper shifts to the left.

Question 34

How would a decrease in the price of tablet computers affect the market for laptop computers (a substitute), all else being equal?

A)increase the demand for laptop computers
B)decrease the demand for laptop computers
C)increase the quantity demanded for laptop computers
D)decrease the quantity demanded for laptop computers

Question 35

Figure 3.1

Refer to Figure 3.1. If the product represented is an inferior good, an increase in income would be represented by a movement from:

A)A to B.
B)B to A.
C)D₁ to D₂.
D)D₂ to D₁.

Question 36

Suppose that when the price of hamburgers decreases, the Ruiz family increases their purchases of tomato sauce. To the Ruiz family:

A)hamburgers and tomato sauce are complements.
B)hamburgers and tomato sauce and substitutes.
C)hamburgers and tomato sauce are normal goods.
D)hamburgers are normal goods and hot dogs are inferior goods.

Question 37

Figure 3.1

Refer to Figure 3.1. A increase in taste or preference for the good would be represented by a movement from:

A)A to B.
B)B to A.
C)D₁ to D₂.
D)D₂ to D₁.

Question 38

Tomas increased his consumption of potato chips when the price of pistachios increased. For Tomas, potato chips and pistachios are:

A)substitutes in consumption.
B)both inferior goods.
C)complements in consumption.
D)both luxury goods.

Question 39

Elle decreased her consumption of bananas when the price of peanut butter increased. For Elle, peanut butter and bananas are:

A)substitutes in consumption.
B)both inferior goods.
C)complements in consumption.
D)both luxury goods.

Question 40

Technological advances have resulted in lower prices for high quality mobile phone cameras. What is the impact of this on the market for digital cameras?

A)The demand curve for digital cameras shifts to the right.
B)The supply curve for digital cameras shifts to the right.
C)The demand curve for digital cameras shifts to the left.
D)The supply curve for digital cameras shifts to the left.

Question 41

Suppose that when the price of hamburgers decreases, the Landry family decreases their purchases of chicken nuggets. To the Landry family:

A)hamburgers and chicken nuggets are complements.
B)hamburgers and chicken nuggets are inferior goods.
C)hamburgers and chicken nuggets are normal goods.
D)hamburgers and chicken nuggets are substitutes.

Question 42

If the price of petrol decreases, what will be the impact in the market for public transportation?

A)The demand curve for public transportation shifts to the right.
B)The quantity of public transportation demanded increases.
C)The demand curve for public transportation shifts to the left.
D)The quantity of public transportation demanded decreases.

Question 43

The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in the price of a complementary product.

Question 44

Corn chips and salsa are complements. If the price of salsa decreases, the demand for corn chips will increase.

Question 45

The income effect explains why there is an inverse relationship between the price of a product and the quantity of the product demanded.

Question 46

The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in purchasing power as a result of the price change.

Question 47

The market demand for a product will shift if which of the following variables shift?

A)the price of the product
B)population
C)technology
D)the prices of substitutes in production

Question 48

The law of demand implies, holding everything else constant, that as the price of ice cream:

A)increases, the demand for ice cream will increase.
B)increases, the quantity of ice cream demanded will increase.
C)decreases, the quantity of ice cream demanded will increase.
D)decreases, the demand for ice cream will increase.

Question 49

A downward movement along a given demand curve is a(n)___________, while a rightward shift in the demand curve is a(n)___________.

A)decrease in demand; increase in demand
B)increase in quantity demanded; increase in demand
C)decrease in demand; increase in quantity demanded
D)increase in quantity demanded; decrease in demand

Question 50

If the price of refillable butane lighters was to decrease, then:

A)the demand for butane would decrease.
B)the demand for butane would increase.
C)the quantity of butane demanded would increase.
D)the quantity of butane demanded would decrease.

Question 51

If some consumers are 'first adopters', that is, they value having the latest technology products, a firm introduces new products because:

A)its competitors will not develop similar products.
B)its older models have stopped selling.
C).it wants to improve existing models.
D)by introducing new features, it can increase the demand for new models.

Question 52

If consumers expect that Apple will introduce a new model iPad soon, this will cause the demand for the current iPads will decrease now.

Question 53

Suppose that when the price of strawberries decreases, Simone increases her purchase of whipped cream. To Simone:

A)strawberries and whipped cream are complements.
B)strawberries and whipped cream and substitutes.
C)strawberries and whipped cream are normal goods.
D)strawberries are a normal good and whipped cream is an inferior good.

Question 54

Sardines are ___________ if a decrease in income leads to an increase in the demand.

A)an inferior good.
B)a neutral good.
C)a necessity.
D)a normal good.

Question 55

Holding everything else constant, a decrease in the price of bicycles will result in:

A)a decrease in the quantity of bicycles demanded.
B)an increase in the demand for bicycles.
C)a decrease in the supply of bicycles.
D)an increase in the quantity of bicycles demanded.

Question 56

A normal good is a good for which the demand increases as income decreases, holding everything else constant.

Question 57

If a decrease in income leads to in a decrease in the demand for baked beans, then baked beans is:

A)a normal good.
B)a neutral good.
C)a complement.
D)a necessity.

Question 58

The phrase 'demand has decreased' means that:

A)a demand curve has shifted to the left.
B)there has been an upward movement along a demand curve.
C)there has been a downward movement along a demand curve.
D)a demand curve has shifted to the right.

Question 59

How does the decreasing use of traditional cameras affect the market for traditional camera film?

A)The demand curve for traditional camera film shifts to the right.
B)The quantity of traditional camera film demanded decreases.
C)The quantity of traditional camera film demanded increases.
D)The demand curve for traditional camera film shifts to the left.

Question 60

If the quantity of grapes demanded increases when the price of grapes falls, economists would describe this as:

A)an increase in demand.
B)an increase in quantity demanded.
C)a change in consumer income.
D)an increase in consumers' taste for grapes.

Question 61

Draw a demand curve and label it D₁. On the graph, illustrate an increase in demand and a decrease in demand, and label the curves D₂ and D₃, respectively. Starting on demand curve D₁, explain the shift that would result from each of the following events:
a.an increase in income and the good is a normal good
b.an increase in income and the good is an inferior good
c.a decrease in the price of a substitute good
d.a decrease in the price of a complementary good
e.an increase in the taste for the good
f.a decrease in population
g.an increase in the expected future price of the good
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Question 62

What are the five variables that will shift the demand curve?
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Question 63

If, in the market for oranges, the supply has increased then:

A)the supply curve for oranges has shifted to the right.
B)the supply curve for oranges has shifted to the left.
C)there has been a movement upwards along the supply curve for oranges.
D)there has been a movement downwards along the supply curve for oranges.

Question 64

What are the two effects that explain the Law of Demand? Briefly explain each effect.
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Question 65

If the price of peaches, a substitute for plums, decreases, then the demand for plums will increase.

Question 66

What is the ceteris paribus condition?
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Question 67

An inferior good is a good for which the quantity demanded decreases as the price increases, holding everything else constant.

Question 68

One would speak of a change in the quantity of a good supplied, rather than a change in supply, if:

A)supplier expectations about future prices change.
B)the price of the good changes.
C)the cost of producing the good changes.
D)prices of substitutes in production change.

Question 69

If consumers believe the price of LCD televisions will decrease in the future, this will cause the demand for LCD televisions to increase now.

Question 70

What is the difference between an 'increase in supply' and an 'increase in quantity supplied'?

A)There is no difference between the two terms; they both refer to a shift of the supply curve.
B)There is no difference between the two terms; they both refer to a movement along a given supply curve.
C)An 'increase in supply' means the supply curve has shifted to the right while an 'increase in quantity supplied' means at any given price supply has increased.
D)An 'increase in supply' means the supply curve has shifted to the right while an 'increase in quantity supplied' refers to a movement along a given supply curve in response to an increase in price.

Question 71

Figure 3.2

Refer to Figure 3.2. An increase in the number of firms in the market would be represented by a movement from:

A)A to B.
B)B to A.
C)S₁ to S₂.
D)S₂ to S₁.

Question 72

Which of the following would cause a decrease in the supply of milk?

A)An increase in the price of cookies (assuming that milk and cookies are complements).
B)A decrease in the price of milk.
C)An increase the price of a product that producers sell instead of milk.
D)An increase in the number of firms that produce milk.

Question 73

If, in the market for peaches, the supply curve has shifted to the left:

A)the supply of peaches has increased.
B)the supply of peaches has decreased.
C)the quantity of peaches supplied has increased.
D)the quantity of peaches supplied has decreased.

Question 74

Last year, the Pottery Palace supplied 8 000 ceramic pots at $40 each. This year, the company supplied the same quantity of ceramic pots at $55 each. Based on this evidence, The Pottery Palace has experienced:

A)a decrease in supply.
B)an increase in supply.
C)an increase in the quantity supplied.
D)a decrease in the quantity supplied.

Question 75

The substitution effect explains why there is a direct relationship between the price of a product and the quantity of the product demanded.

Question 76

Figure 3.2

Refer to Figure 3.2. An increase in price of inputs would be represented by a movement from:

A)A to B.
B)B to A.
C)S₁ to S₂.
D)S₂ to S₁.

Question 77

In October, market analysts predict that the price of platinum will fall in November. What happens in the platinum market in October, holding everything else constant?

A)The supply curve shifts to the right.
B)The supply curve shifts to the left.
C)The quantity demanded and the quantity supplied of platinum increase.
D)The demand curve shifts to the right.

Question 78

A 'supply schedule':

A)is a table that shows the relationship between the price of a product and the quantity of the product supplied.
B)is a table that shows the relationship between the price of a product and the quantity of the product that producers and consumers are willing to exchange.
C)is the relationship between the supply of a good and the cost of producing the good.
D)is a curve that shows the relationship between the price of a product and the quantity of the product supplied.

Question 79

Explain the difference between a 'normal good' and an 'inferior good'.
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Question 80

For each of the following pairs of products, state which are complements, which are substitutes, and which are unrelated.
a.Blu-ray discs and video-on-demand
b.Fiat 500 and Mini Cooper S
c.Toothpaste and toothbrush
d.Popcorn and snowboards
e.Razors and razor blades
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