Deck 4: Demand, Supply, and Markets

Question 1

If supply of a good increases while its demand decreases, then equilibrium price will fall.​

Answer 1

True

Question 2

When both supply and demand for a good increases, the change in equilibrium quantity is indeterminate.​

Answer 2

False

Question 3

The substitution effect of a price change describes the change in the quantity demanded of a good due to a change in its relative price.​

Answer 3

True

Question 4

As the price of ballpoint pens increases, the demand for felt-tip pens can be expected to decrease.​

Question 5

A price floor set below the equilibrium price will result in a surplus.​

Question 6

Markets tend to increase the costs of time and information required for exchange.​

Question 7

The impact of a $200 increase in income on quantity of housing demanded would be called an income effect.​

Question 8

Classified ads and job web sites reduce the transaction costs of finding a new job.​

Question 9

A mismatch between quantity demanded and quantity supplied will always force a price change.​

Question 10

Disequilibrium occurs due to the absence of government intervention in certain markets.​

Question 11

Other things constant, the demand for a product is the amount that:​

A)sellers are willing and able to sell at alternative prices.
B)buyers purchase over different time periods.
C)sellers are willing to sell at a particular price.
D)buyers are willing and able to purchase at different prices.
E)buyers are willing to consume at a constant price.

Question 12

Demand for an inferior good decreases as consumer income increases.​

Question 13

When suppliers of a good that can be easily stored expect its price to increase in future, they will reduce its current supply.​

Question 14

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

Question 15

Rent controls generally provide the tenants the most efficient housing choice in the long run and maximize economic welfare.​

Question 16

An increase in professors' salaries increases the supply of college education.​

Question 17

A decrease in the price of peanuts will cause a leftward shift in the supply curve of peanut butter.​

Question 18

A price ceiling set above the equilibrium price of a good will result in a shortage.​

Question 19

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

Question 20

If demand decreases, then quantity supplied will increase.​

Question 21

If we say that demand for a good 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 22

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

A)Positive relation between money income and demand
B)Inverse relation between price and quantity supplied
C)Substitution effect of a price change
D)Income effect of a price change
E)Positive relation between price and quantity demanded

Question 23

The law of demand states that as the price of a good rises, _____.​

A)buyers purchase more of the good, because they expect prices to be even higher in the future
B)buyers purchase less of the good, because they expect prices to fall in the future
C)buyers purchase less of the good, because their real income decreases with an increase in price
D)buyers purchase more of the good, because the price of a substitute has risen
E)buyers purchase more of the good, because the higher price reflects an improvement in product quality

Question 24

The income effect of a decrease in the price of legal services, a normal good, is a(n):​

A)decrease in the demand for legal services.
B)decrease in the quantity demanded of legal services.
C)increase in the quantity supplied of lawyers.
D)increase in the quantity demanded of legal services.
E)increase in the supply of lawyers.

Question 25

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 26

The following figure shows the demand curves for baby formula. Which of the following changes is likely to happen if the price of baby formula increases?​ ​
Figure 4.1

A)A shift in the demand curve from D₁ to D₂
B)A movement along demand curve D₁ from point a to point b
C)A shift in the demand curve from D₂ to D₁
D)A movement along the demand curve D₂ from point d to point c
E)A movement from point b on the demand curve D₁ to point c on the demand curve D₂

Question 27

The following figure shows the demand curves for baby formula. Which of the following changes is likely to happen if the price of baby formula decreases?​ ​
Figure 4.1

A)A shift in the demand curve from D₁ to D₂
B)A movement along the demand curve D₁ from point a to point b
C)A shift in the demand curve from D₂ to D₁
D)A movement along the demand curve D₂ from point d to point c
E)A movement from point b on the demand curve D₁ to point c on the demand curve D₂

Question 28

Suppose a consumer can choose to consume either apples or oranges. Which of the following results when the price of each fruit increases by 15 percent?​

A)The consumer substitutes apples for oranges.
B)The income effect of this price change is positive.
C)The substitution effect of this price change is zero.
D)The consumer demands more of both the goods.
E)The consumer substitutes oranges for apples.

Question 29

For which of the following goods or services is the income effect of a price change likely to be the greatest?​

A)Vitamin capsules
B)Gasoline
C)Laundry
D)Chocolates
E)College textbooks

Question 30

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

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

Question 31

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

A)increase in the demand for onions.
B)decrease in the quantity demanded of potatoes.
C)increase in the demand for potatoes.
D)increase in the quantity demanded of potatoes.
E)decrease in the demand for onions.

Question 32

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

A)have a greater impact than the income effect of an increase in the price of a chewing gum.
B)be almost negligible, because everything except price is assumed constant along a demand curve.
C)have less of an effect than the income effect of a decrease in the price of dairy products.
D)be almost negligible, because housing is a necessity.
E)have a greater impact than the positive substitution effect of this price change.

Question 33

A movement along a demand curve can be attributed to a change in:​

A)the demand for a good.
B)the opportunity cost of producing a good.
C)the quantity demanded of a good.
D)the substitution effect of consuming a good.
E)the income and preference of a consumer.

Question 34

The effect of a decrease in the price of personal computers on consumer demand, other things constant, is most likely to be represented by a:​

A)leftward shift of the demand curve for personal computers.
B)leftward movement along the demand curve for personal computers.
C)rightward shift of the demand curve for personal computers.
D)rightward movement along the demand curve for personal computers.
E)decrease in the slope of the demand curve for personal computers.

Question 35

Studies show that the demand curve for peas has shifted over the years. Which of the following 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 36

The explanation for the law of demand begins with:

A)a small number of wants satisfied by scarce resources.
B)finite wants satisfied by infinite resources.
C)unlimited wants confronting scarce resources.
D)unlimited wants matching up with unlimited resources.
E)prices acting as signals to existing and potential suppliers.

Question 37

A decrease in demand for a good generally implies that:​

A)consumers are willing to pay a higher price for each unit of the good.
B)consumers are willing to buy larger quantities of the good at each price.
C)the demand curve for the good has shifted to the right.
D)the demand curve for the good has become steeper.
E)the demand curve for the good has shifted to the left.

Question 38

Which of the following statements about a demand curve is true?​

A)The demand curve for a good will not shift when money income of consumers increases.
B)If price increases, the demand curve shifts to the right.
C)The demand curve for a good will not shift when its price 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 39

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 of backpacks demanded.
C)decrease in the supply of backpacks.
D)increase in the quantity of backpacks demanded.
E)increase in the quantity supplied of backpacks.

Question 40

The law of demand states that:​

A)other things remaining constant, price and quantity demanded are positively related.
B)price is the only factor that influences the quantity that people are willing and able to buy.
C)other things remaining constant, quantity demanded varies inversely with price.
D)other things remaining constant, the demand curve shifts whenever the price of a good changes.
E)by producing a product, firms create a demand for it.

Question 41

Jennifer expects the price of CDs to go up by 10 percent next week. Which of these is most likely to result from such an expectation?​

A)Jennifer's demand for CD players will decrease during this week.
B)Jennifer's demand for CDs will decrease during this week.
C)Jennifer's demand for CDs will increase during the following week.
D)Jennifer's demand for CDs will increase during this week.
E)Jennifer's demand for CD players will increase during the following week.

Question 42

Which of the following will cause the demand curve for gasoline to shift leftward?​

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)An increase in the price of cars

Question 43

Sugar and honey are viewed as substitutes for each other in many cooking applications. 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 44

If butter and margarine are substitute goods, an increase in the price of butter is most likely to:​

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

Question 45

Two goods are considered substitutes only if a(n):​

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

Question 46

In the figure given below that shows the demand for baby formula, which of the following changes will be caused by the discovery that breast milk provides more protection against a life threatening disease than baby formula?​ ​
Figure 4.1

A)A shift in the demand curve from D₁ to D₂
B)A movement along the demand curve D₁ from point a to point b
C)A shift in the demand curve from D₂ to D₁
D)A movement along the demand curve D₂ from point d to point c
E)A movement from point b on the demand curve D₁ to point c on the demand curve D₂

Question 47

Which of these can possibly account for a decrease in the demand for peanut butter, a normal good?​

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

Question 48

Which of the following is the best example of substitute goods?​

A)Coffee and cream
B)Videotapes and VCRs
C)Money and biscuits
D)Tortillas and salsa
E)Powdered and liquid laundry detergent

Question 49

Which of the following statements about gold jewelry and round-trip bus tickets to Bismarck, North Dakota, is most likely to be correct?​

A)They are both inferior goods.
B)Their demand curves have equal slope.
C)They are complements.
D)They are substitutes.
E)They are unrelated.

Question 50

Which of the following will cause the demand curve for a normal good to shift 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 51

Which of the following is most likely to cause the demand for ice cream, a normal good, to decrease?​

A)A decrease in the price of ice cream
B)A decrease in the price of milk
C)A warmer weather
D)An increase in the number of consumers
E)A decrease in consumer income

Question 52

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

A)money income of consumers on the price of a good.
B)the relative price of a good on the demand for other goods.
C)the price of a good on a consumer's real income.
D)the price of a substitute good on a consumer's budget.
E)money income of consumers on the demand for a good.

Question 53

Which of the following is likely to shift the demand curve for a normal good to the right?​

A)A decrease in income, if the good is a normal good
B)An increase in the price of a complementary good
C)A decrease in the good's price, if the good is normal
D)An increase in the good's price, if the good is inferior
E)An expectation of a shortage in the future

Question 54

Which of these is most likely to cause a leftward shift of the demand curve for a normal good?​

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

Question 55

Which of the following is the best example of a pair of complements?​

A)Milk and coffee
B)Coffee and tea
C)CDs and DVDs
D)Hiking boots and athletic shoes
E)Paperback books and hard cover books

Question 56

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

A)Bologna sandwiches
B)Second-hand electronic appliances
C)Tickets to major league baseball games
D)Bus rides
E)Used paperback books

Question 57

If Good B is a complement to Good A, then a decrease in the price of Good B:​

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

Question 58

In case of a normal good, an increase in consumers' incomes would shift the:​

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

Question 59

If demand for personal computers increases as a result of an increase in income, _____.​

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 complements for personal computers must be inferior goods

Question 60

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

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

Question 61

As the price of milk increases, producers are generally willing to sell a larger quantity of milk in the market, other things constant. This represents the law of:​

A)demand.
B)decreasing opportunity costs.
C)variable proportions.
D)diminishing marginal utility.
E)supply.

Question 62

Figure 4.2 shows the demand curves for a good. A shift from demand curve D' to demand curve D in the figure below would be caused by a(n):​ ​
Figure 4.2

A)increase in the price of the good under consideration.
B)significant decrease in population because of emigration.
C)increase in the price of a substitute good.
D)decrease in the number of producers of the product.
E)decrease in the price of an important resource.

Question 63

Figure 4.4 shows the supply curve for a good. According to the figure given below, which of these will result when price increases from P to P'?​ ​
Figure 4.4

A)Quantity supplied will increase.
B)Supply will become elastic.
C)Supply will increase.
D)Supply will become inelastic.
E)Supply will decrease.

Question 64

A supply curve typically slopes upward because:​

A)opportunity cost of production increases as quantity supplied increases.
B)price and quantity supplied are inversely related.
C)quantity supplied is positively related to consumer income.
D)the substitution effect of a price change on quantity supplied is generally positive.
E)the income effect of a price change on quantity supplied is generally negative.

Question 65

In the figure given below that shows the demand for baby formula, an increase in the birth rate is likely to cause which of the following changes?​ ​
Figure 4.1

A)A shift in the demand curve from D₁ to D₂
B)A movement along the demand curve D₁ from point a to point b
C)A shift in the demand curve from D₂ to D₁
D)A movement along the demand curve D₂ from point d to point c
E)A movement from point b on demand curve D₁ to point c on demand curve D₂

Question 66

Figure 4.2 shows the demand curves for a good. A shift from demand curve D to demand curve D' in the figure would be caused by a(n):​ ​
Figure 4.2

A)decrease in the price of the good under consideration.
B)significant increase in population because of immigration.
C)decrease in consumer income.
D)decrease in the number of producers of the product.
E)increase in the price of an important resource.

Question 67

A change in money income of consumers will:​

A)affect the demand for housing through the income effect of a price change.
B)affect the demand for housing through the substitution effect of a price change.
C)shift the market demand curve for housing.
D)affect quantity demanded only if housing is an inferior good.
E)have no impact on the market demand for housing.

Question 68

Which of the following is most likely to shift the supply curve for a product to the right?​

A)An increase in the price of a resource used in the good's production
B)The expectation of a higher price in the near future
C)An increase in the price of the product
D)A decrease in the price of an alternative good
E)An improvement in the technology for producing the good

Question 69

The introduction of a new cost effective production technique is likely to:​

A)shift the demand curve leftward.
B)make the demand curve flatter.
C)shift the supply curve leftward.
D)make the supply curve steeper.
E)shift the supply curve rightward.

Question 70

If the price of potato chips increases, other things constant, demand for potato chip dip will:​

A)decrease because potato chip is an inferior good.
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 71

Which of the following best defines supply?​

A)The amount of a good that producers want to sell at a fixed price
B)The amount of a good that consumers want to buy at different income levels
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 is produced at the least possible cost, other things constant
E)The amount of a good that consumers are willing and able to buy at each possible price, other things constant

Question 72

The market supply curve of a particular product indicates the total quantities:​

A)that are actually sold during a given time period.
B)that buyers are willing to purchase at alternative prices.
C)that sellers are willing and able to offer at alternative prices.
D)that sellers are willing to offer for sale at a fixed price.
E)of complements offered for sale.

Question 73

Producers supply larger quantities of any good at higher prices because:​

A)prices signal product quality.
B)higher prices attract resources from other uses.
C)people are naturally lazy and refuse to give up their leisure.
D)price and quantity supplied are inversely related.
E)of the law of decreasing opportunity cost.

Question 74

In the figure given below that shows the demand for baby formula, if baby formula is an inferior good, then an increase in consumer income is likely to cause which of the following changes?​ ​
Figure 4.1

A)A shift in the demand curve from D₁ to D₂
B)A movement along the demand curve D₁ from point a to point b
C)A shift in the demand curve from D₂ to D₁
D)A movement along the demand curve D₂ from point d to point c
E)A movement from point b on the demand curve D₁ to point c on the demand curve D₂

Question 75

Which of the following will lead to an increase in quantity supplied of a given good?​

A)An increase in resource prices
B)A technological improvement
C)An increase in population
D)An increase in the price of the good
E)An increase in the price of an alternative good

Question 76

The figure given below shows the supply of baby formula. Which of the following is likely to result from an increase in the price of baby formula?​ ​
Figure 4.3

A)A movement from point a to point b on the supply curve S₁
B)A leftward shift of the supply curve from S₂ to S₁
C)A movement from point d to point c on the supply curve S₂
D)A rightward shift of the supply curve from S₁ to S₂
E)A movement from point b to point a on the supply curve S₁

Question 77

Figure 4.3 shows the supply curves for baby formula. In the figure given below, the development of more efficient production technologies for baby formula is likely to cause which of the following changes?​ ​
Figure 4.3

A)A rightward shift of the supply curve from S₁ to S₂
B)A movement from point a to point b on the supply curve S₁
C)A leftward shift of the supply curve from S₂ to S₁
D)A movement from point c to point d on the supply curve S₂
E)A movement from point b to point a on the supply curve S₁

Question 78

Figure 4.3 shows the supply curves for baby formula. In the figure given below, which of the following changes is likely to result from an increase in the number of firms producing baby formula?​ ​
Figure 4.3

A)A rightward shift of the supply curve from S₁ to S₂
B)A movement from point a to point b on the supply curve S₁
C)A leftward shift of the supply curve from S₂ to S₁
D)A movement from point c to point d on the supply curve S₂
E)A movement from point b to point a on the supply curve S₁

Question 79

As the baby boom ended, fewer families had young children and, as a consequence, the:​

A)quantity demanded of preschool services decreased.
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)quantity demanded of preschool services increased.

Question 80

Which of the following would most likely increase the supply of college textbooks?​

A)Exodus of five major publishers from the industry
B)An increase in the cost of paper used in books
C)An increase in the wage rate of workers associated with printing
D)Expectation of a price rise in the future
E)An improvement in the technology used in book production