Deck 4: Demand, Supply, and Market Equilibrium

Question 1

If watermelons are normal goods, the demand for them will rise as the income of consumers rises.

Answer 1

True

Question 2

Because personal tastes differ, what are substitutes for one person need not be substitutes for another person.

Answer 2

True

Question 3

Increasing government taxation or regulation of an industry generally increases the supply of goods.

Answer 3

False

Question 4

If the price of pizza falls, the demand for pizza will rise.

Question 5

According to the law of demand, other things equal, when the price of a good or service falls, demand increases.

Question 6

Ceteris paribus, if the price of lumber increases, we would expect an increase in the supply of lumber.

Question 7

A technological advance that reduces the cost of producing computers will shift the supply curve of computers to the right.

Question 8

A market is not really a place but rather the process of buyers and sellers exchanging goods and services.

Question 9

According to the law of supply, other things equal, when the price of a good or service rises, the quantity supplied increases, but supply does not.

Question 10

A competitive market is one in which a number of buyers and sellers are offering similar products, and no single buyer or seller can influence the market price.

Question 11

If an increase in the price of Good A causes an increase in the demand for Good B, Goods A and B are said to be substitutes.

Question 12

Two goods are complements if a decrease in the price of one causes an increase in the demand for the other good.

Question 13

When the price of corn falls relative to the price of wheat, the market supply of wheat (which can be grown on the same land) is likely to increase.

Question 14

If an increase in the price of Good A causes a decrease in demand for Good B, Goods A and B are said to be complements.

Question 15

If consumers were originally willing to buy 500 units of a good at a price of $20 are now willing to buy 500 units of the same good at a price of $10, that change would be described as a decrease in demand.

Question 16

If input prices fall, it will lower the cost of production, causing the supply curve to shift to the right.

Question 17

When the price of ice cream falls, we would expect the quantity demanded of ice cream to rise, ceteris paribus.

Question 18

If Diet Pepsi and Diet Coke are substitutes than an increase in the price of Diet Pepsi will cause a decrease in demand for Diet Coke.

Question 19

If an increase in the price of Good A causes an increase in the demand for Good B, Goods A and B are said to be complements.

Question 20

If the demand for fast-food rises as a result of lower income, we would say fast-food is an inferior good.

Question 21

An increase in quantity demanded

A)​illustrated by a movement downward and to the right along a demand curve.
B)​illustrated by a movement upward and to the left along a demand curve.
C)​shifts the demand curve to the left.
D)​shifts the demand curve to the right.

Question 22

A decrease in quantity demanded

A)​illustrated by a movement downward and to the right along a demand curve.
B)​illustrated by a movement upward and to the left along a demand curve.
C)​shifts the demand curve to the left.
D)​shifts the demand curve to the right.

Question 23

In economics, the demand for a good refers to the amount of the good people:

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

Question 24

The quantity demanded of a good is the amount that buyers are

A)​willing to buy.
B)​willing and able to buy.
C)​willing, able, and need to buy.
D)​able to buy.

Question 25

Either technological progress or cost increasing new government regulations will increase supply.

Question 26

If the market for wheat is in equilibrium, the quantity of wheat demanded will equal the quantity of wheat supplied.

Question 27

An increase in the price of ice cream would cause a decrease in the demand for ice cream and an increase in the demand for frozen yogurt, a substitute.

Question 28

"Other things equal, when the price of a good rises, the quantity demanded of the good falls, and when the price falls, the quantity demanded rises." This relationship between price and quantity demanded is referred to as

A)​equilibrium.
B)​the law of demand.
C)​the relationship between demand and income.
D)​the definition of a normal good.

Question 29

An increase in the price of a good will

A)​increase demand.
B)​decrease demand.
C)​increase quantity demanded.
D)​decrease quantity demanded.

Question 30

The law of demand illustrates a(n) ____ relationship between price and ____.

A)​direct; quantity demanded
B)​inverse; quantity demanded
C)​inverse; demand
D)​direct; demand

Question 31

Which of the following is not held constant along a given demand curve?

A)​income
B)​price
C)​tastes
D)​expectations

Question 32

Either an increase in the number of buyers or an increase in tastes or preferences for a good or service will increase the market demand for that good or service.

Question 33

Which of the following is true of a competitive market?

A)​The rules of supply and demand do not apply to it.
B)​Buyers and sellers have little market power.
C)​Each buyer's or seller's effect on market price is substantial.
D)​Few sellers offer similar products.

Question 34

The law of demand asserts that:

A)​output prices are more important than input prices.
B)​when people want a good badly enough they will find a way to pay for it.
C)​people want to buy more of goods that are priced very high because of their prestige.
D)​the quantity of a good that people will buy is inversely related to the product's price.

Question 35

Price reductions will usually result whenever the quantity supplied exceeds the quantity demanded at the current price.

Question 36

The law of demand refers to the:

A)​decrease in price that results as more units of a product are demanded.
B)​increase in price that results from an increase in demand for a good of limited supply.
C)​inverse relationship between the price of a good and the quantity demanded.
D)​increase in the quantity of a good made available when its price increases.

Question 37

Which of the following relationships reflect the law of supply?

A)​an increase in Q_S => a decrease in Price
B)​a decrease in Price => an increase in supply
C)​an increase in Price => an increase in Q_S
D)​a decrease in Price => an increase in Q_S

Question 38

A decrease in the price of a good would

A)​increase the supply of the good.
B)​increase the quantity demanded of the good.
C)​give producers an incentive to produce more to keep profits from falling.
D)​shift the supply curve for the good to the left.

Question 39

A decrease in the price of a good will

A)​increase demand.
B)​decrease demand.
C)​increase quantity demanded.
D)​decrease quantity demanded.

Question 40

When the price of a good or service changes

A)​the supply curve shifts in the opposite direction.
B)​the demand curve shifts in the opposite direction.
C)​the demand curve shifts in the same direction.
D)​there is a movement along a given demand curve.

Question 41

When quantity demanded decreases at every possible price, the demand curve

A)​shifts to the left.
B)​shifts to the right.
C)​there is a movement along the given demand curve.
D)​none of the above.

Question 42

When a demand schedule is drawn in a graph:

A)​price is measured on the vertical axis.
B)​quantity is measured on the horizontal axis.
C)​other variables are held constant.
D)​all of the above are correct.

Question 43

The law of demand states that, ceteris paribus, an increase in

A)​price causes quantity demanded to increase.
B)​price causes quantity demanded to decrease.
C)​quantity demanded causes price to increase.
D)​quantity demanded causes price to decrease.

Question 44

If the price of music downloads decreases, which of the following is most likely to occur?

A)​Quantity demanded will decrease.
B)​Quantity demanded will increase.
C)​Demand will increase.
D)​Demand will decrease.

Question 45

If the demand for milk is downward sloping, then an increase in the price of milk will result in a(n):

A)​increase in the demand for milk.
B)​decrease in the demand for milk.
C)​increase in the quantity of milk demanded.
D)​decrease in the quantity of milk demanded.

Question 46

A change in which of the following variables does not cause a change in demand?

A)​prices of unrelated goods
B)​incomes of demanders
C)​the number of demanders
D)​tastes of demanders

Question 47

The quantity of a good demanded tends to increase as its price falls because:

A)​a decrease in price shifts the demand curve to the right.
B)​a decrease in price shifts the demand curve to the left.
C)​a decrease in price shifts the supply curve to the right.
D)​a decrease in price leads consumers to substitute toward this now relatively cheaper product.

Question 48

When quantity demanded increases at every possible price, the demand curve

A)​shifts to the left.
B)​shifts to the right.
C)​there is a movement along the given demand curve.
D)​none of the above.

Question 49

Which of these statements best represents the law of demand?

A)​When buyers' tastes for a good increase, they buy more of the good.
B)​When the size of the consumer population rises, buyers purchase more of most goods.
C)​When the price of a good decreases, buyers purchase more of the good.
D)​Changes in preferences lead to changes in demand.

Question 50

When quantity demanded decreases in response to a change in price:

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

Question 51

A downward-sloping demand curve shows:

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

Question 52

To find the market demand curve for a product, we sum the individual demand curves

A)​vertically.
B)​diagonally.
C)​horizontally.
D)​perpendicularly.

Question 53

If consumers are less willing and able to pay for each level of output than they were previously, then apparently:

A)​demand has increased.
B)​supply has increased.
C)​demand has decreased.
D)​there has been a movement down along the demand curve.

Question 54

The demand schedule for a good:

A)​indicates the quantity that people will buy at the prevailing price.
B)​indicates the quantities that suppliers will sell at various market prices.
C)​indicates the quantities that will be purchased at alternative market prices.
D)​is determined primarily by the cost of producing the good.

Question 55

The law of demand refers to the:

A)​negative relationship between the price of a good and the willingness of producers to sell it.
B)​price increase that results from an increase in demand.
C)​inverse relationship between the price of a good and the quantity demanded.
D)​increase in the quantity of a good made available when its price increases.

Question 56

Which of the following is true of a demand curve?

A)​It must remain stable over time.
B)​It can shift either rightward or leftward.
C)​It is possible to move along the curve, but the demand curve will not shift.
D)​None of the above are true.

Question 57

A downward-sloping demand curve illustrates

A)​that demand increases.
B)​that prices fall.
C)​the relationship between income and demand.
D)​the law of demand.

Question 58

Assume the demand schedule for cookies is downward sloping. If the price of cookies falls from $2.50 to $2.25 per dozen:

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

Question 59

Which of the following explains why the quantity of a good demanded decreases when its price increases?

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

Question 60

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

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

Question 61

If there is a decrease in demand

A)​firms would be willing to supply less of the good than before at each possible price.
B)​buyers are willing to purchase less of the good than before at each possible price.
C)​buyer's taste for the good has increased.
D)​the price of the product has increased, causing consumers to buy less of the product.

Question 62

A demand curve shows the relationship between price and quantity demanded, "other things remaining constant." The other things that remain constant include all of the following except the:

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

Question 63

Each of the following is a determinant of demand except

A)​tastes.
B)​production technology.
C)​expectations.
D)​the prices of related goods.

Question 64

According to the income effect, an increase in the price of oranges will:

A)​cause consumers to consume more apples because of greater savings on that good.
B)​cause consumers to spend more on oranges because a higher price signals that oranges are better than apples.
C)​cause consumers to replace some oranges with other fruit that is now relatively cheaper than oranges.
D)​leave consumers with less real income to spend on all goods.

Question 65

Which of the following would cause an increase in the demand curve for oranges?

A)​a freeze in Florida (a major orange producing state)
B)​a new machine that allows orange growers to harvest oranges faster
C)​a decrease in the price of apples
D)​an announcement by the FDA that oranges lowers cholesterol

Question 66

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 income of cheese consumers, assuming that cheese is a normal good
C)​an increase in the population
D)​a technological advance that makes it cheaper to produce cheese

Question 67

All of the following would shift a product's demand curve except a(n):

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

Question 68

Economists normally

A)​do not try to explain people's tastes, but they do try to explain what happens when tastes change.
B)​believe that they must be able to explain people's tastes in order to explain what happens when tastes change.
C)​do not believe that people's tastes determine demand, so they ignore the subject of tastes.
D)​incorporate tastes into economic models only to the extent that tastes determine whether pairs of goods are substitutes or complements.

Question 69

Which of the following would cause an increase in demand for golf balls?

A)​a decrease in the price of golf balls
B)​an increase in the price of green fees
C)​an expectation by buyers that their incomes will increase in the very near future
D)​a change in consumer tastes away from golf and toward tennis

Question 70

Based on widespread reaction to the threat of the H1N1 virus, the likely effect on the demand curve for hand sanitizers would be

A)​a shift of the demand curve to the right.
B)​a movement downward along the demand curve to the right.
C)​a shift of the demand curve to the left.
D)​a movement upward along the demand curve to the left.

Question 71

Which of the following would cause the demand curve for DVDs to shift to the right?

A)​a decrease in the price of DVDs
B)​a decrease in the price of DVD players
C)​a change in the tastes towards watching movies in movie theaters
D)​a decrease in the number of people in the market for DVDs

Question 72

Which of the following would shift the demand curve for gasoline to the right?

A)​a decrease in the price of gasoline
B)​an increase in consumer income, assuming gasoline is a normal good
C)​an increase in the price of cars, a complement for gasoline
D)​a decrease in the expected future price of gasoline

Question 73

Which of the following changes would not shift the demand curve for a good or service?

A)​a change in income
B)​a change in the price of the good or service
C)​a change in expectations about the future price of the good or service
D)​a change in the price of a related good or service

Question 74

Pizza is a normal good if the demand

A)​for pizza rises when income rises.
B)​for pizza rises when the price of pizza falls.
C)​curve for pizza slopes upward.
D)​curve for pizza shifts to the right when the price of burritos rises, assuming pizza and burritos are substitutes.

Question 75

Which of the following events would cause an upward movement along the demand curve for olives?

A)​The number of people who purchase olives decreases.
B)​Consumer income decreases, and olives are a normal good.
C)​The price of pickles decreases, and pickles are a substitute for olives.
D)​The price of olives rises.

Question 76

An increase in demand could be caused by

A)​a decrease in price.
B)​a decrease in income, assuming the good is inferior.
C)​buyers expecting the price of the good to fall in the near future.
D)​an increase in the price of a complement.

Question 77

You lose your job and, as a result, you buy fewer iTunes music downloads. This shows that you consider iTunes music downloads to be a(n)

A)​luxury good.
B)​inferior good.
C)​normal good.
D)​complementary good.

Question 78

A decrease in demand could be caused by

A)​an increase in price.
B)​a decrease in the price of a complement.
C)​a technological advance.
D)​a decrease in the price of a substitute.

Question 79

A movement along the demand curve might be caused by a change in

A)​income.
B)​the prices of substitutes or complements.
C)​expectations about future prices.
D)​the price of the good or service that is being demanded.

Question 80

Which of the following events would cause an upward movement along the demand curve for olives?

A)​The number of people who purchase olives decreases.
B)​Consumer income decreases, and olives are a normal good.
C)​The price of pickles decreases, and pickles are a substitute for olives.
D)​The price of olives rises.