Deck 3: Supply and Demand

Question 1

If the price of Nike⁽ᵗᵐ⁾ running shoes increased from $100 to $120,and the price of comparable New Balance⁽ᵗᵐ⁾ shoes increased from $100 to $130,how have the prices changed?

A)The nominal prices of both shoes have decreased, and the relative price of the Nike shoes has fallen.
B)The nominal prices of both shoes have decreased, and the relative price of the Nike shoes has risen.
C)The nominal prices of both shoes have increased, and the relative price of the Nike shoes has fallen.
D)The nominal prices of both shoes have increased, and the relative price of the Nike shoes has risen.

Answer 1

The nominal prices of both shoes have increased, and the relative price of the Nike shoes has fallen.

Question 2

When the price of a good falls relative to other goods and the consumer consequently buys more of this good,what is this referred to as?

A)the income effect
B)the substitution effect
C)the net effect
D)the complement effect

Answer 2

the substitution effect

Question 3

Which of the following statements about the demand schedule for a good is the most accurate?

A)It indicates the quantities that will be purchased at alternative market prices.
B)It indicates the quantity that will be produced at various costs.
C)It indicates the quantities that suppliers will sell at various market prices.
D)It indicates the quantity that people will buy at the prevailing price.

Answer 3

It indicates the quantities that will be purchased at alternative market prices.

Question 4

Assume the demand schedule for cookies is downward sloping.What is the effect if the price of cookies falls?

A)A larger quantity of cookies will be demanded.
B)A smaller quantity of cookies will be demanded.
C)The demand for cookies will rise.
D)The demand for cookies will fall.

Question 5

According to the law of demand,what happens as the price of a good increases?

A)More of it is produced.
B)Buyers desire to purchase less of it.
C)More of it is desired.
D)Suppliers wish to sell less of it.

Question 6

Ceteris paribus,which of the following statements describes a market when transportation costs are high relative to selling prices?

A)There are numerous markets that are geographically limited.
B)There are few markets that are geographically limited.
C)There are numerous markets that are global in scope.
D)There are few markets that are global in scope.

Question 7

In economics,what does the demand for a good refer to?

A)The amount people would like to have if the good was free.
B)The amount people need to achieve a minimum standard of living.
C)The amount people will buy at alternative income levels.
D)The amount people will buy at various prices.

Question 8

TABLE 3-1

Refer to Table 3-1.It illustrates the demand schedules for gourmet ice cream of two individuals and the rest of the market.At a price of $8,what would the quantity demanded in the market be?

A)12
B)22
C)31
D)39

Question 9

If the demand for milk is downward sloping,then what will an increase in the price of milk result in?

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

Question 10

What does a downward-sloping demand curve illustrate?

A)It illustrates the inverse relationship between price and quantity demanded; as price increases, the quantity demanded decreases.
B)It illustrates the inverse relationship between price and quantity supplied; as price increases, the quantity supplied decreases.
C)It illustrates the direct relationship between price and quantity demanded; as price increases, the quantity demanded increases.
D)It illustrates the direct relationship between price and quantity supplied; as price increases, the quantity supplied increases.

Question 11

What provides an explanation for the inverse relationship between price and quantity demanded?

A)a preference for cheaper items
B)the income effect
C)a decline in money incomes as prices fall
D)the price effect

Question 12

When the price of orange juice increases,consumers may switch to apple juice or tomato juice.What is this switch a result of?

A)the complement effect
B)the price effect
C)the substitution effect
D)the income effect

Question 13

According to the substitution effect,what impact will an increase in the price of oranges have on consumers?

A)It will leave consumers with less money to spend on all goods.
B)It will cause consumers to consume fewer apples because more money is spent on oranges.
C)It will cause consumers to replace some oranges with other fruit that is now relatively cheaper than oranges.
D)It will cause consumers to spend more on oranges because a higher price signals that oranges are better than apples.

Question 14

Which of the following is NOT a characteristic of competitive markets?

A)numerous sellers
B)fixed market prices
C)numerous buyers
D)similar products

Question 15

In a competitive market,how are prices determined?

A)by the interaction of many buyers and many sellers
B)by the interaction of many buyers with the largest seller
C)by the government, who sets the prices that sellers can charge
D)by the largest buyer, who sets the price that all firms sell at

Question 16

When a demand schedule is drawn in a graph,which of the following statements best describes the graph?

A)Other variables are held constant.
B)The resulting curve has a positive slope.
C)Quantity is measured on the vertical axis.
D)Price is measured on the horizontal axis.

Question 17

Why are economists more interested in relative prices rather than money prices?

A)because relative prices frequently decline due to deflationary trends
B)because economists are not concerned with real-world activities, just theoretical models
C)because relative prices are the actual dollar prices paid by consumers
D)because what matters is how much the price of a good has changed relative to substitute products

Question 18

Which of the following describes what happens when the price of a Big Mac doubles,while the price of a Whopper increases by one-third?

A)The relative price of a Whopper falls.
B)The relative price of a Big Mac falls.
C)The nominal prices of Big Macs and Whoppers rise, but their relative prices remain the same.
D)The relative price of a Whopper rises.

Question 19

What do the income and substitution effects provide an explanation for?

A)why the supply curve is vertical
B)why the supply curve is horizontal
C)why the demand curve is upward sloping
D)why the demand curve is downward sloping

Question 20

Which of the following statements about the demand curve for a typical good is the most accurate?

A)It has an inverse slope because as the price goes up, the good has more profitability.
B)It has a negative slope because consumer incomes fall as the price of the good rises.
C)It has a negative slope because some consumers switch to other goods as the price rises.
D)It has a negative slope because the good has less "snob appeal" as its price falls.

Question 21

Which of the following would NOT cause a change in the demand for cheese?

A)an increase in the population of cheese lovers
B)an increase in the income of cheese consumers
C)an increase in the price of cheese
D)an increase in the price of crackers, which are consumed with cheese

Question 22

FIGURE 3-1

Refer to Figure 3-1.Beginning on D₁,what would a shift to D₂ indicate?

A)an increase in quantity demanded
B)an increase in demand
C)a decrease in demand
D)a decrease in quantity demanded

Question 23

Assuming that Chinese food and Thai food are substitutes,which of the following will result if P.F.Chang's Chinese Restaurant reduces its prices?

A)The demand for meals at P. F. Chang's will increase.
B)The demand for meals at the Bah Thai restaurant will decrease.
C)The sales of the nearby Bah Thai restaurant will increase.
D)The quantity of food demanded from P. F. Chang's will decrease.

Question 24

If consumers are less willing and able to pay for each level of output than they were previously,what is the effect in the market?

A)Demand will decrease.
B)Supply will decrease.
C)Demand will increase.
D)Supply will increase.

Question 25

Why does the quantity of a good demanded decrease when its price increases?

A)Complements become relatively cheaper when the price of a good increases.
B)Consumer preferences change when the price of a good changes.
C)The nominal income of consumers falls when the price of a good increases.
D)Substitutes become relatively cheaper when the price of a good increases.

Question 26

Ceteris paribus,what effect would an increase in the price of DVD players tend to have?

A)It would increase the demand for DVD players.
B)It would decrease the demand for DVD players.
C)It would increase the price of televisions, a complement to DVD players.
D)It would increase the demand for VCRs, a substitute for DVD players.

Question 27

What is the difference between a change in quantity demanded and a change in demand?

A)A change in demand is caused by a change in a good's own price, while a change in quantity demanded is caused by a change in some other variable, such as income, tastes, or expectations.
B)A change in quantity demanded is a change in the amount people actually buy, while a change in demand is a change in the amount they want to buy.
C)A change in demand is a change in the amount people actually buy, while a change in quantity demanded is a change in the amount they want to buy.
D)A change in quantity demanded is caused by a change in a good's own price, while a change in demand is caused by a change in some other variable, such as income, tastes, or expectations.

Question 28

Skateboards International of Regina,Saskatchewan,was able to sell 20 000 skateboards at a price of $60 in 2010.In 2011,it was able to sell only 12 000 of the same skateboards at a price of $60.What has Skateboards International evidently experienced?

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

Question 29

Which of the following would NOT shift a product's demand curve?

A)an increase in the price of the product
B)an increase in the price of a complement
C)an increase in the price of a substitute
D)a decrease in consumer income

Question 30

If the price of ice cream increases and the quantity demanded decreases,how would economists describe this?

A)a change in quantity demanded
B)a change in demand
C)a change in consumer income
D)a change in one of the variables that shifts demand

Question 31

Which of the following will NOT increase the demand for iced tea?

A)an increase in advertising that makes drinking iced tea more appealing
B)a decrease in the price of iced tea
C)an increase in the income of consumers (assume that iced tea is a normal good)
D)an increase in the price of iced coffee, a substitute product

Question 32

How is the market demand curve determined?

A)by subtracting the individual demands curves from the supply curve
B)by horizontally summing the individual demand curves
C)by vertically summing the individual demand curves
D)by averaging all the individual demand curves

Question 33

The price of automobiles has increased sharply lately.As a result,what have automobile dealers noticed?

A)Demand has decreased.
B)Demand has increased.
C)Quantity demanded has increased.
D)Quantity demanded has decreased.

Question 34

Other things constant,what effect will an increase in the price of beef have?

A)It will encourage consumers to buy more beef.
B)It will shift the demand curve for beef to the left.
C)It will shift the demand curve for beef to the right.
D)It will discourage consumers from buying as much beef.

Question 35

FIGURE 3-1

Refer to Figure 3-1.Beginning on D₁,what would a shift to D₀ indicate?

A)an increase in quantity demanded
B)a decrease in demand
C)a decrease in quantity demanded
D)an increase in demand

Question 36

Which of the following would NOT cause an increase in the demand for cheese?

A)a decrease in the price of crackers, which are consumed with cheese
B)an increase in the population of cheese lovers
C)an increase in the income of cheese consumers, assuming that cheese is a normal good
D)a technological advance that makes it cheaper to produce cheese

Question 37

Which of the following changes does NOT cause a change in demand?

A)a change in the tastes of demanders
B)a change in prices of unrelated goods
C)a change in the incomes of demanders
D)a change in the number of demanders

Question 38

FIGURE 3-2

Refer to Figure 3-2.As a result of the decrease in donut prices at Yum Yum Donuts,what do the managers at Krispy Kreme discover about the demand for their donuts?

A)Demand increased from D₀ to D₁.
B)Demand has not changed.
C)Demand decreased from D₁ to D₀.
D)Demand increased from D₁ to D₀.

Question 39

TABLE 3-1

Refer to Table 3-1.It illustrates the demand schedules for gourmet ice cream of two individuals and the rest of the market.At $4,what would the quantity demanded in the market be?

A)12
B)22
C)31
D)39

Question 40

A demand curve shows the relationship between price and quantity demanded,"other things remaining constant." Which of the following is NOT included in the other things that remain constant?

A)the price of substitute products
B)the price of the product
C)the number of consumers in the demographic group purchasing the product
D)the price of complementary products

Question 41

Which of the following would be least likely to affect the supply of automobiles?

A)increased wages for members of the Canadian Auto Workers union
B)a successful physical fitness plan encouraging Canadians to walk rather than drive to their destinations
C)higher prices for steel and other resources used in producing automobiles
D)a technological improvement reducing the production costs of automobiles

Question 42

Vodka and whiskey are considered by consumers to be substitutes.What is the likely economic impact of a decrease in the price of whiskey?

A)a decrease in the supply of whiskey
B)a movement down along the demand curve for vodka
C)a leftward shift of the demand curve for vodka
D)a movement up along the demand curve for vodka

Question 43

Andy views beer and pizza as complements to one another.If the price of pizza decreases,what would economists expect?

A)Andy's demand for pizza to decrease
B)Andy's demand for pizza to increase
C)Andy's demand for beer to decrease
D)Andy's demand for beer to increase

Question 44

If an increase in the price of Good X causes a decrease in the demand for Good Y,what can we conclude?

A)The price of Good Y will increase.
B)Goods X and Y are normal goods.
C)Goods X and Y are complements.
D)Goods X and Y are substitutes.

Question 45

Which of the following statements about the demand for a normal good is the most accurate?

A)It decreases when price rises.
B)It decreases when income falls.
C)It increases when income falls.
D)It increases when price rises.

Question 46

Which of the following would be most likely to cause an outward shift of the demand curve for electricity?

A)a decrease in the price of natural gas
B)a decrease in the price of electricity
C)an increase in the price of heating oil
D)an increase in the price of air conditioners

Question 47

When the price of automobile insurance increases sharply,what is the likely impact on the market for automobiles?

A)an increase in quantity demanded
B)an increase in demand
C)a decrease in quantity demanded
D)a decrease in demand

Question 48

Which of the following would increase the demand for 35mm film?

A)a reduction in the price of 35mm film cameras
B)a reduction in the price of digital cameras (that do not use film)
C)an increase in the price of 35 mm film
D)an increase in the price of vacation packages

Question 49

FIGURE 3-2

Refer to Figure 3-2.Two donut chains in your town are battling for customers.The manager of the Yum Yum Donut Shop,facing demand curve D₁,has changed donut prices from P₀ to P₁.What do the customers do as a result?

A)They increase purchases at Yum Yum to Q₁.
B)They buy the same quantity of Yum Yum donuts as before the price change.
C)They decrease demand to D₀.
D)They decrease purchases at Yum Yum to Q₀.

Question 50

If there are widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada,what is the likely economic effect on the U.S.demand curve for beef from Canada?

A)no change
B)a shift of the demand curve for beef to the right
C)a movement down along the demand curve for beef to the right
D)a shift of the demand curve for beef to the left

Question 51

The price of peanut butter falls and as a result the demand for jam increases.What can we conclude?

A)Peanut butter and jam are inferior goods.
B)The marginal value of jam is greater than the marginal value of peanut butter.
C)Peanut butter and jam are complements.
D)Peanut butter and jam are substitutes.

Question 52

FIGURE 3-3

Refer to Figure 3-3.The University Theatre faces market demand curve D₀ and has begun charging $10,up from $5,for tickets for Friday and Saturday night shows.What will students do as a result?

A)Increase their quantity of tickets demanded to Q₄.
B)Decrease their demand for tickets to Q₁.
C)Increase their demand for tickets to Q₄.
D)Decrease their quantity of tickets demanded to Q₁.

Question 53

Roxanne considers movie tickets and DVD rentals to be substitute forms of entertainment.What will an increase in the price of a DVD rental likely result in for Roxanne?

A)a decrease in her quantity of movie tickets demanded
B)an increase in her demand for movie tickets
C)an increase in her quantity of DVD rentals demanded
D)a decrease in her supply of movie tickets

Question 54

When quantity demanded decreases in response to a change in price,how is this reflected in the demand curve?

A)There is a movement down along the demand curve.
B)There is a movement up along the demand curve.
C)The demand curve shifts to the right.
D)The demand curve shifts to the left.

Question 55

Whenever the price of Good A decreases,the demand for Good B increases.What do Goods A and B appear to be?

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

Question 56

FIGURE 3-3

Refer to Figure 3-3.Everyone has been raving about the newest summer blockbuster film.You decide to see a movie even though ticket prices have risen to $10 per ticket.You are not alone,as many students are waiting in line at the theatre,shifting the demand curve to D₁.How many tickets are the theatre owners now selling?

A)Q₁ tickets
B)Q₂ tickets
C)Q₃ tickets
D)Q₄ tickets

Question 57

As consumers experience an increase in income,the demand for steak increases and the demand for macaroni and cheese decreases.What can we determine from this information?

A)Steak and macaroni are substitute goods.
B)Steak and macaroni are complementary goods.
C)Steak is an inferior good, and macaroni is normal.
D)Steak is a normal good, and macaroni is inferior.

Question 58

Suppose the price of gasoline and other petroleum products declines sharply.Which of the following will most likely occur as a result of the lower petroleum prices?

A)an increase in demand for solar heating systems
B)an increase in demand for larger, more powerful automobiles
C)an increase in demand for home insulation products
D)an increase in demand for gasoline

Question 59

Which of the following factors will NOT affect the supply of shoes?

A)higher prices for leather
B)an increase in consumer income
C)higher wages for shoe factory workers
D)a technological improvement that reduces waste of leather and other raw materials in shoe production

Question 60

Suppose we observe an increase in the price of oranges.Which of the following is the most likely cause?

A)a scientific discovery that states that oranges cause tooth decay
B)good growing weather in Florida
C)a decrease in income if oranges are a normal good
D)an increase in the price of apples

Question 61

What does an upward-sloping supply curve show?

A)Suppliers expand production as the product price falls.
B)Suppliers are willing to increase production of their goods if they receive higher prices for them.
C)Buyers are willing to pay more for particularly scarce products.
D)Buyers are willing to buy more as the product price falls.

Question 62

Which of the following statements about the law of supply is most accurate?

A)There is an inverse relationship between price and the quantity supplied.
B)There is an inverse relationship between price and quantity demanded.
C)There is a direct relationship between price and quantity demanded.
D)There is a direct relationship between price and the quantity supplied.

Question 63

If a product's price increases,what happens to quantity?

A)Quantity demanded increases.
B)Quantity supplied does not change, but supply does increase.
C)Quantity supplied decreases.
D)Quantity supplied increases.

Question 64

What does a supply schedule show?

A)possible combinations of output as input prices vary
B)projected sales as advertisement spending changes
C)how many units consumers would like to buy at various prices
D)how many units producers are willing and able to sell at various prices

Question 65

Which of the following statements about the supply curve is the most accurate?

A)It shows how the average cost of production varies with price.
B)It shows the same basic information as a demand curve.
C)It shows how the quantity demanded varies with price.
D)It shows how the quantity supplied varies with price.

Question 66

Which of the following would NOT shift the supply curve for salmon?

A)an increase in the price of salmon
B)unusually stormy weather during fishing season
C)a reduction in the number of available fishing boats
D)the development of innovative new fishing equipment that makes it easier to catch salmon

Question 67

What is the difference between a change in quantity supplied and a change in supply?

A)A change in supply and a change in the quantity supplied are the same thing.
B)A change in quantity supplied is a change in the amount people want to sell, while a change in supply is a change in the amount they actually sell.
C)A change in quantity supplied is caused by a change in a good's own price, while a change in supply is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes.
D)A change in supply is caused by a change in a good's own price, while a change in the quantity supplied is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes.

Question 68

Which of the following will NOT cause a change in the supply of a product?

A)a change in the price of alternative goods that could be produced with the same resources
B)a natural disaster
C)a change in the price of suppliers' inputs
D)a change in the price of the product

Question 69

Steel producers offer to sell steel to Canadian auto producers at a much lower price than in the past.What would one expect to be the result of this?

A)a decrease in the demand for automobiles
B)an increase in the supply of automobiles
C)an increase in the demand for automobiles
D)a decrease in the supply of automobiles

Question 70

Which of the following would most likely cause a reduction in the supply of Nintendo video games?

A)an increase in the price of computer chips used to make Nintendo games
B)a decrease in the price of Nintendo video games
C)an increase in the demand for Nintendo video games
D)a decrease in the price of computer chips used to make Nintendo games

Question 71

FIGURE 3-4

Refer to Figure 3-4.What does a change from Point A to Point D represent?

A)an increase in quantity demanded
B)a decrease in quantity demanded
C)an increase in demand
D)a decrease in demand

Question 72

According to the law of supply,what would we predict will occur when the price of a good increases?

A)More will be produced.
B)Less will be consumed.
C)More will be consumed.
D)Less will be produced.

Question 73

Other things constant,what will be the effect of a decrease in the price of fertilizer on the market for wheat?

A)an increase the supply of wheat
B)an increase the demand for wheat
C)a decrease the supply of wheat
D)a decrease the demand for wheat

Question 74

What does a supply curve illustrate a direct relationship between?

A)price and quantity demanded
B)price and demand
C)price and quantity supplied
D)price and supply

Question 75

Which of the following would NOT cause a change in the supply of milk?

A)an increase in the cost of feed for cows
B)the discovery of growth hormones to stimulate the milk production of cows
C)an increase in government subsidies to dairy farmers
D)an increase in the price of milk

Question 76

What is the result of an increase in a product's price?

A)Product supply does not change, but quantity supplied increases.
B)Product supply does not change, but quantity supplied decreases.
C)Product supply decreases.
D)Product supply increases.

Question 77

What would happen to demand if consumers expect the price of a good to rise in the near future?

A)The current demand would increase.
B)The future demand would decrease.
C)The current demand would not be affected.
D)The current demand would decrease.

Question 78

What would happen to demand if consumers expect the price of computers to fall in the near future?

A)The demand for computers rises today.
B)The demand for computers falls today.
C)The quantity demanded of computers rises today.
D)The demand for computers will rise in the future.

Question 79

FIGURE 3-4

Refer to Figure 3-4.What does a change from Point A to Point B represent?

A)a decrease in demand
B)a decrease in quantity demanded
C)an increase in demand
D)an increase in quantity demanded

Question 80

Which of the following best describes what happens when you move along the supply curve?

A)Quantity supplied changes as technology changes.
B)Quantity supplied changes as price changes.
C)Supply changes as price changes.
D)Supply changes as technology changes.