Deck 3: Demand and Supply

Question 1

In economics,"demand" refers to

A)the intensity of desire for a good.
B)the amount of a good people need rather than the amount they want.
C)the satisfaction a good will provide a person.
D)the quantities of a good that people will buy at various prices.

Answer 1

D

Question 2

The money price of a good is that price

A)expressed in constant 2005 dollars.
B)expressed in purchasing power against a common item like bread.
C)expressed in today's dollars.
D)that would clear the market.

Answer 2

C

Question 3

The price of an MP3 music player increased from $50 to $70 while the price of a music download increased from $1 to $2.The relative price of an MP3 music player in terms of music downloads

A)increased from 0.04 to 0.05.
B)decreased from 50 to 35.
C)increased,but we need more information to know by how much.
D)decreased,but we need more information to know by how much.

Answer 3

B

Question 4

A fundamental principle in demand analysis is that a change in price leads to

A)a movement along the demand curve.
B)a rightward shift of the demand curve.
C)a leftward shift of the demand curve.
D)a complementary movement on the supply curve.

Question 5

Refer to the above figure.Which panel demonstrates the law of demand?

A)Panel A.
B)Panel B.
C)Panel C.
D)Panel D.

Question 6

The law of demand is based on the observation that

A)people buy less of a product when the product becomes less fashionable.
B)people buy more of a product when the price falls.
C)people are indifferent to price changes.
D)stores go out of business if they lower prices.

Question 7

According to the law of demand,an increase in the price of a good causes

A)a rightward shift of the demand curve for that good.
B)a leftward shift of the demand curve for that good.
C)an upward movement along the demand curve for that good.
D)a downward movement along the demand curve for that good.

Question 8

The money price of a good is also known as its

A)relative price.
B)case price.
C)absolute price.
D)subjective price.

Question 9

The relative price of a good is that price

A)expressed in today's dollars.
B)expressed in constant 2012 dollars.
C)expressed in terms of the price of another good.
D)that is equal to the equilibrium price.

Question 10

Suppose that the price of cornflakes is $3 per box and the price of oatmeal is $4.50 per box.Both boxes contain the same number of ounces of cereal.The relative price of cornflakes in terms of oatmeal is

A)0.67.
B)1.0.
C)0.75.
D)1.50.

Question 11

According to the law of demand,other things being equal,

A)when the price a good goes up,then people buy more of that good.
B)when the price a good goes up,then people buy less of that good.
C)when people's income goes up,then they buy more of a good.
D)when people's income goes up,then they buy less of a good.

Question 12

The law of demand states that

A)people demand less at lower prices.
B)the quantity demanded is directly related to price.
C)the quantity demanded is inversely related to price.
D)changes in price and changes in quantity demanded move in the same direction.

Question 13

The law of demand states that

A)consumers have unlimited demands for a good.
B)a higher price will lead to increased sales.
C)the price can never be too high for some consumers.
D)quantity demanded will vary inversely with the price of the good.

Question 14

The only variable that can affect a movement along the demand curve is

A)income levels.
B)the price of the good itself.
C)the number of buyers.
D)the number of substitutes.

Question 15

Which of the following is an example of the law of demand?

A)An increase in the price of magnetic optical disks is followed by a reduction in the amount of magnetic optical disks purchased.
B)An increase in the price of tablets is followed by an increase in the sale of tablets.
C)A decrease in the price of milk has no effect on the amount of milk consumed.
D)The amount of smartphones sold increases while the price of smartphones is constant.

Question 16

The demand curve is downward sloping because

A)the price must rise to induce firms to increase quantity supplied.
B)a reduction in the price of a good causes individuals to increase their purchase of that good.
C)an increase in the price will cause a leftward shift in the demand curve.
D)all of the above.

Question 17

The law of demand tells us that people will buy more of a good if

A)the price of that good decreases.
B)the prices of other goods decrease.
C)people's income increases.
D)every factor that can affect people's buying decisions changes.

Question 18

The law of demand states that

A)consumers will exhaust their incomes as they purchase goods and services at given absolute prices.
B)the quantity demanded of a good is higher at a lower relative price than at a higher relative price.
C)there is a direct positive relationship between relative price and quantity demanded.
D)if the price of a good increases both relatively and absolutely,there will be no change in quantity demanded.

Question 19

The concept of "demand" in economics refers to

A)the different quantities of a good or service people will buy at different possible prices.
B)the different types of goods and services that people of different income levels want to buy.
C)how changes in the prices of all goods affect people's buying behavior.
D)changes in people's consumption behavior over time.

Question 20

The law of demand includes the statement "other things being equal." These other things include all of the following EXCEPT

A)the price of that good in the law of demand.
B)consumers' income.
C)consumers' tastes and preferences.
D)the number of potential buyers.

Question 21

John believes that when the price of a good increases people will purchase more of the good.This statement is

A)consistent with the law of demand.
B)inconsistent with the law of demand.
C)referring to money prices.
D)consistent with the law of supply.

Question 22

A schedule of amounts of a good that people will purchase at various prices during a specific time period holding other factors constant is

A)a market.
B)supply.
C)demand.
D)the market clearing price.

Question 23

Market demand is

A)the total quantities demanded of all consumers of a particular item at given prices.
B)a movement along the demand curve in response to the market.
C)total equilibrium demand for the market.
D)the demand for and supply of a good or service.

Question 24

Which of the following illustrates the law of demand?

A)More people watch college basketball in March than in November.
B)The number of long distance calls in the United States is greater on Christmas than on Valentine's Day.
C)College enrollment increases when federal tuition grants are readily available to students.
D)The prevailing wage rate in an industry determines how many people choose to work in the industry.

Question 25

Which of the following is an example of the law of demand?

A)A decrease in the price of milk is followed by an increase in milk purchases.
B)A decrease in the price of milk is followed by a decrease in milk purchases.
C)An increase in the price of milk has no effect on the amount of milk purchased.
D)The amount of milk purchased increases when the price is constant.

Question 26

Other things being equal,an increase in the price of a good leads to a decrease in the amount people purchase.This is known as

A)the law of demand.
B)the law of supply.
C)ceteris paribus.
D)equilibrium.

Question 27

According to the law of demand,the quantity demanded of a good is related to

A)the average price of all goods.
B)income.
C)any factor that affects the decision of an individual consumer but not the market.
D)the relative price of that good.

Question 28

Demand is a schedule of

A)how much of a good a person wants.
B)how much of a good people will purchase at each different possible price.
C)how much of a good people will purchase at each income level.
D)each possible price and the amount people will buy when their incomes change.

Question 29

According to the law of demand

A)price and quantity demanded move in the same direction.
B)price and quantity demanded move in opposite directions.
C)ceteris paribus does not apply.
D)price and quantity demanded are unrelated.

Question 30

Which one of the following statements is FALSE?

A)Generally,what matters most to consumers is what a good costs in dollars.
B)The relative price of a good is its price measured relative to the price of other goods.
C)The nominal price of a good is its price measured in current dollars.
D)When the price of beer goes up by the same proportion as the prices of all other goods,the relative price of beer does not change.

Question 31

The price of a new textbook increases from $75 to $90 while the price of used copies of the textbook increases from $50 to $65.Other things equal,we would expect to observe

A)the quantity demanded of the used textbook to increase while the quantity demanded of the new textbook to fall.
B)the quantity demanded of both to fall.
C)the demand for the new textbook to increase while the demand for the used textbook to decrease.
D)the quantity demanded of the used textbook to decrease and the quantity demanded of the new textbook to increase.

Question 32

In economics,the meaning of demand refers to

A)how badly someone wants a good.
B)the quantities of a good that people will buy at various prices.
C)the quantities of a good that people will sell at various prices.
D)the total satisfaction that consuming a good provides people at different prices.

Question 33

Which of the following best represents the law of demand?

A)As the price of a good decreases,the demand for the good increases.
B)As the price of a good increases,the quantity demanded of that good decreases.
C)As the demand for a good increases,the price of that good increases.
D)As the price of a good decreases,the demand curve for that good shifts to the right.

Question 34

The price of a new textbook increased from $60 to $75 in one year,while the price of a used textbook increased by 25 percent.What happened to the relative price of a used textbook?

A)It increased by 25 percent.
B)It increased by 10 percent.
C)It remained constant.
D)It can't be determined without knowing the nominal price of the used textbook in at least one of the years.

Question 35

The arrangements that individuals have with each other to exchange goods is known as

A)demand.
B)supply.
C)a market.
D)complements.

Question 36

When the term "price" is used in the law of demand,price refers to

A)the dollar price of the good.
B)the price of the good relative to the price of another good.
C)the absolute price of the good.
D)the nominal price of the good relative to its nominal price in the previous year.

Question 37

Markets are

A)a mechanism through which prices of goods and services are determined by the forces of supply and demand.
B)specific geographic locations.
C)hypothetical constructs used to analyze how people form their tastes and preferences.
D)places where people can inspect goods and services carefully.

Question 38

According to the law of demand,

A)people buy more of a good when the price rises.
B)people buy more of a good when their income rises.
C)people buy more of a good when the relative price rises.
D)people buy more of a good when the price falls.

Question 39

Demand applies to which of the following?

A)Fast food
B)Criminal activity
C)Labor market
D)All of the above

Question 40

The price of a new textbook is $60 in one year and $75 two years later,while the price of a used copy of the textbook increased from $25 to $37.50.The relative price of a new textbook

A)increased by 25 percent.
B)increased from 2.4 to 3.
C)decreased from 2.4 to 2.0.
D)decreased from 1.4 to 1.25

Question 41

Pam graduates from law school and gets a position in a law firm.At the same time the price of hamburger falls while other food prices have stayed the same.She notices that she buys less hamburger than she did before.Is she violating the law of demand?

A)Yes,since she is buying less hamburger at a lower price.
B)Yes,since she is buying less hamburger in a relatively short period of time and we wouldn't expect her tastes to have changed.
C)No,since the law of demand refers to relative price changes and the price of hamburger falling is an absolute price change.
D)No,since other things are not held constant,such as her income.

Question 42

The price of a new textbook increases from $120 to $160,while the price of used copies of the textbook increased from $80 to $100.Other things being equal,we would expect

A)the quantity demanded of the used textbook to increase and the quantity demanded of the new textbook to decrease.
B)the quantity demanded of both to fall.
C)the demand for the new textbook to increase and the demand for the used textbook to decrease.
D)the quantity demanded of the used textbook to decrease and the quantity demanded of the new textbook to increase.

Question 43

The price of a new textbook increased by 25 percent and the price of a used textbook increased by 30 percent.What happened to the relative price of the new textbook?

A)It increased by 5 percent.
B)It increased,but we can't tell by how much without more information.
C)It decreased by 5 percent.
D)It decreased,but we can't tell by how much without more information.

Question 44

The price of a loaf of bread is $1.50,the price of a gallon of milk is $3.00,and the price of a pound of butter is $2.40.The price of a loaf of bread relative to a gallon of milk is ________,while the price of a gallon of milk relative to a pound of butter is ________.

A)0.5;0.8.
B)0.5;1.25.
C)2.0;1.25.
D)2.0;0.8.

Question 45

The price of a first-class stamp in 1957 was 3 cents,and it is 45 cents in 2012.From this we know that

A)both the relative and the absolute price of first-class stamps increased from 1957 to 2012.
B)the money price of first-class stamps increased from 1957 to 2012 but the absolute price of first-class stamps stayed constant.
C)the money price of first-class stamps increased from 1957 to 2012 and the relative price of first-class stamps decreased.
D)the money price of first-class stamps increased from 1957 to 2012,but we can't tell if the relative price of first-class stamps increased or decreased without more information.

Question 46

The price of a new textbook is $120 in one year and is $150 two years later,while the price of a used copy of the text increased from $40 to $60.The relative price of a new textbook

A)increased from 3 to 4.5.
B)decreased from 0.8 to 0.67.
C)decreased from 3 to 2.5.
D)remained constant.

Question 47

The price of a gallon of gasoline increased from $2.00 to $2.25 while the price of a ride on the city bus increased from 50 cents to 75 cents.The relative price of riding the city bus

A)increased from 0.25 to 0.6.
B)decreased from 4.0 to 3.0.
C)stayed constant at 0.25.
D)stayed constant at 4.0.

Question 48

The price of a new car is $40,000 while the price of a five-year old car of the same brand is $16,000.The next year the price of the new car increases to $44,000 and the price of a five-year old car of the same brand is $17,600.The relative price of the used car

A)decreased by $2,400.
B)decreased by 10 percent.
C)increased by 10 percent.
D)remained constant at 0.4.

Question 49

The relative price of a textbook is

A)the money price of the textbook divided by the money price of some other good.
B)the price of the textbook compared with what students think it should cost.
C)the amount it cost to make the textbook.
D)what the author earned for writing the textbook.

Question 50

The price that we observe in the market is

A)the law of demand.
B)a substitute.
C)the money price.
D)the relative price.

Question 51

Suppose all prices increase by 10 percent in the year while the total sales of HDTVs remain constant.This is

A)a violation of the law of demand since fewer HDTVs should be purchased at a higher price.
B)a violation of the law of demand since more HDTVs should have been purchased with higher incomes.
C)not a violation of the law of demand since the relative price of HDTVs did not change.
D)not a violation of the law of demand since the law of demand does not apply to expensive goods like HDTVs.

Question 52

The law of demand includes the statement "other things being equal." These other things include all of the following EXCEPT

A)the price of the good itself.
B)the price of related goods.
C)incomes.
D)tastes.

Question 53

An increase in the relative price of a good cannot be caused by

A)an increase in the nominal price of the good that is greater than the increase in the nominal price of the other good.
B)a decrease in the nominal price of the good that is less than the decrease in the nominal price of the other good.
C)a decrease in the nominal price of the other good while the price of the good itself remains constant.
D)an increase in the nominal price of the other good while the price of the good itself remains constant.

Question 54

The price of a commodity in terms of another commodity is

A)the law of demand.
B)a substitute.
C)the money price.
D)the relative price.

Question 55

The absolute price of a good is its

A)relative price.
B)money price.
C)subjective price.
D)projected price.

Question 56

The price of a phone call at a pay phone was 5 cents in 1950 and the price of a first-class stamp was 3 cents.In 2010,the pay phone costs 50 cents for a call and a first-class stamp costs 44 cents.We know that

A)both the nominal and the relative price of phone calls increased from 1950 to 2010.
B)both the nominal prices of phone calls and first-class stamps increased from 1950 to 2010,but the relative price of stamps increased and the relative price of phone calls decreased from 1950 to 2010.
C)all prices increased from 1950 to 2010: Nominal prices of phone calls,first-class stamps,and the relative prices of phone calls and first-class stamps.
D)both the nominal prices of phone calls and first-class stamps increased from 1950 to 2010,but we can't tell if the relative prices increased or decreased without more information.

Question 57

If we are comparing the price of regular gasoline with the price of super gasoline,then an increase in the relative price of regular gasoline implies that

A)the nominal price of regular gasoline increased.
B)the nominal price of super gasoline decreased.
C)the relative price of super gasoline decreased.
D)the relative price of regular gasoline increased.

Question 58

The price of bread in terms of gallons of milk per loaf is 0.6 and the price a gallon of milk in terms of pounds of butter per gallon is 1.2.What is the relative price of bread to butter?

A)1.39
B)0.6
C)0.72
D)0.50

Question 59

Jane has noticed that she used to pay $2 for coffee and now she pays $2.50.Which of the following statements is true?

A)The relative price of coffee has increased compared to tea.
B)The money price of coffee has increased.
C)The law of supply explains why the price of coffee has increased.
D)Jane will stop consuming coffee.

Question 60

The "real" price of a good is known as

A)the absolute price of the good.
B)the dollar price of the good since we use dollars in the United States.
C)relative price of the good.
D)the price actually paid for a good instead of the sticker price.

Question 61

Suppose that the demand curve for apples is downward sloping and the price per bushel increases from $6.50 to $7.50.We would then expect

A)the demand for apples to decrease.
B)the quantity of apples demanded to fall.
C)the demand curve to shift toward the origin.
D)the quantity of apples demanded to increase.

Question 62

Which one of the following statements is true?

A)If the money price of a good increases,its relative price necessarily increases.
B)If the money price of a good increases,its relative price necessarily decreases.
C)The relative price of a good refers to the opportunity cost of purchasing it.
D)Rational consumers always ignore the monetary price of a good when deciding whether to buy it.

Question 63

Consider the following: The relative price of hamburgers this year has

A)increased.
B)decreased.
C)stayed the same.
D)Not enough information has been given to calculate an answer.

Question 64

What type of relationship does the law of demand demonstrate?

A)direct
B)positive
C)inverse
D)static

Question 65

The law of demand shows that there is

A)an inverse relationship between price and profit.
B)an inverse relationship between price and resource cost.
C)an inverse relationship between price and quantity demanded.
D)a direct relationship between price and quantity demanded.

Question 66

Ceteris paribus,as the price of a good or service increases,

A)people will buy more of it.
B)people will buy less of it.
C)people will want less of it.
D)people will want more of it.

Question 67

Consider the following: The relative price of movies this year has

A)increased.
B)decreased.
C)stayed the same.
D)Not enough information has been given to calculate an answer.

Question 68

The law of demand

A)is only an assumption that cannot be tested.
B)only applies to necessities,not to luxuries.
C)is supported by observations of human behavior in the marketplace.
D)does not apply to scarce goods.

Question 69

When the price of tablets goes up and fewer tablets are purchased,this is representative of the

A)law of demand.
B)law of supply.
C)law of market operations.
D)law of increasing costs.

Question 70

The law of demand states that there is

A)an inverse relationship between income and quantity demanded,ceteris paribus.
B)a direct relationship between income and quantity demanded,ceteris paribus.
C)no relationship between taste and quantity demanded,ceteris paribus.
D)an inverse relationship between price and quantity demanded,ceteris paribus.

Question 71

The price of one product in terms of another commodity is called its

A)relative price.
B)money price.
C)financial price.
D)converse price.

Question 72

Demand is defined as

A)a schedule of how much of an item people will purchase at any particular price of that item during a specified time period,other things being constant.
B)a specific quantity of an item that people want at a particular price of that item during a specified time period,other things being constant.
C)a schedule of how much of a good or service people will purchase at any particular price of a different item during the specified time period,other things being constant.
D)a specific quantity of a good or service that people will purchase at one particular price of another item during a specified time period,other things being constant.

Question 73

A demand curve

A)slopes down because of the inverse relationship between price and quantity demanded.
B)slopes up because of the direct relationship between price and quantity demanded.
C)can slope up or down depending on the tastes of the consumer.
D)is vertical for necessities,upward sloping for luxury goods,and downward sloping for all other goods.

Question 74

State the law of demand and illustrate it.Explain what is meant by the term "price" in the law of demand.

Question 75

The fact that when the price of a good goes up,people buy less of it is known as the

A)law of supply.
B)law of demand.
C)concept of market equilibrium.
D)need for inferior goods.

Question 76

The law of demand implies that the demand curve

A)has a negative slope.
B)has a positive slope.
C)shifts to the right when the price of a good increases.
D)shifts to the left when the price of a good decreases.

Question 77

Total market demand can be calculated by

A)horizontally summing individual demand curves at each and every price level.
B)vertically summing individual demand curves at each and every income level.
C)adding up the largest quantity demanded by each individual.
D)looking at the changes in the products' popularity.

Question 78

The demand curve shows the relationship between quantity demanded and

A)income.
B)price.
C)supply.
D)quantity supplied.

Question 79

In 1950,a phone call at a pay phone cost 5 cents and a first-class stamp cost 3 cents.Today,those prices are 50 cents and 44 cents respectively.What has happened to the price of each good relative to the other? What has happened to the price of each good relative to all other goods?

Question 80

The statement "other things being equal" in the law of demand means all of the following remain constant EXCEPT

A)consumer income.
B)the price of the good concerned in the law of demand.
C)the prices of substitutes.
D)tastes and preferences.