Deck 3: Demand and Supply

Question 1

The price of a bag of corn chips is $3, and the price of a bottle of soda is $1. What is the relative price of a bottle of soda?

A) 3 bags of corn chips per bottle of soda
B) 1/3 bag of corn chips per bottle of soda
C) $3
D) 33¢

Answer 1

1/3 bag of corn chips per bottle of soda

Question 2

The opportunity cost of a hot dog in terms of hamburgers is the

A) ratio of the slope of the demand curve for hot dogs to the slope of the demand curve for hamburgers.
B) ratio of the slope of the supply curve for hot dogs to the slope of the supply curve for hamburgers.
C) money price of a hot dog minus the money price of a hamburger.
D) ratio of the money price of a hot dog to the money price of a hamburger.

Answer 2

ratio of the money price of a hot dog to the money price of a hamburger.

Question 3

Wants, as opposed to demands,

A) are the unlimited desires of the consumer.
B) are the goods the consumer plans to acquire.
C) are the goods the consumer has acquired.
D) depend on the price.

Answer 3

are the unlimited desires of the consumer.

Question 4

The price of a bag of corn chips is $3, and the price of a bottle of soda is $1. What is the relative price of a bag of corn chips?

A) 3 bottles of soda per bag of corn chips
B) 1/3 bottle of soda per bag of corn chips
C) $3
D) 33¢

Question 5

Twenty years ago a stove cost $300 and a refrigerator cost $1,500. Today a stove costs $600, while a refrigerator costs $1,800. Which of the following statements is true?

A) The relative price of stoves and refrigerators has not changed.
B) The relative price of a refrigerator has increased.
C) The relative price of a stove has increased.
D) The money price of a refrigerator has fallen.

Question 6

A relative price is

A) the number of dollars that must be given up in exchange for the good.
B) also called the money price.
C) not an opportunity cost.
D) the ratio of one price to another price.

Question 7

If the price of a hot dog is $2 and the price of a hamburger is $4, then the

A) relative price of a hot dog is 1/2 of a hamburger per hot dog.
B) money price of a hot dog is 2 hamburgers per hot dog.
C) relative price of a hamburger is 1/2 of a hot dog per hamburger.
D) money price of a hamburger is 2 hot dogs per hamburger.

Question 8

If the price of a candy bar is $1 and the price of a fast food meal is $5, then the

A) relative price of a candy bar is 5 fast food meals per candy bar.
B) money price of a candy bar is 1/5 of a fast food meal per candy bar.
C) relative price of a fast food meal is 5 candy bars per fast food meal.
D) money price of a fast food meal is 1/5 of a candy bar per fast food meal.

Question 9

The opportunity cost of a good is the same as its

A) money price.
B) relative price.
C) price index.
D) none of the above

Question 10

The relative price of a good is

A) an opportunity cost.
B) equal to the money price of a good.
C) equal to the price of that good divided by the quantity demanded of the good.
D) what you get paid for babysitting your cousin.

Question 11

The price of a DVD rental is $1.50 and the price of a downloaded movie is $1.00. If the price of a DVD rental increases by $0.50, the relative price a downloaded movie

A) rises.
B) falls.
C) does not change.
D) might change, but more information is needed.

Question 12

If the money price of wheat increases and no other prices change, the

A) relative price of wheat falls.
B) opportunity cost of wheat rises.
C) demand for wheat increases.
D) relative price of wheat is unaffected.

Question 13

The opportunity cost of good A in terms of good B is equal to the

A) money price of good A minus the money price of good B.
B) money price of good B minus the money price of good A.
C) ratio of the money price of good A to the money price of good B.
D) ratio of the money price of good B to the money price of good A.

Question 14

The price of a DVD rental is $2.50 and the price of a downloaded movie is $1.00. If the price of a DVD rental falls by $0.50, the relative price a downloaded movie

A) rises.
B) falls.
C) does not change.
D) might change, but more information is needed.

Question 15

If the money price of hats rises and no other prices change, the I. relative price of a hat rises.
II) opportunity cost of a hat rises.

A) only I
B) both I and II
C) only II
D) neither I nor II

Question 16

Joe pays $8,000.00 in tuition. The 8,000 dollar tuition Joe pays is an example of what economists call

A) a relative price.
B) a money price.
C) an indexed price.
D) an opportunity price.

Question 17

An ice cream cone costs $1.50. A can of soda costs $0.75. The relative price of an ice cream cone is

A) 1/2 can of soda per ice cream cone, the opportunity cost of an ice cream cone.
B) $1.50, the opportunity cost of a can of soda.
C) 2 cans of soda per soda, the opportunity cost of an ice cream cone.
D) $0.75, the opportunity cost of a can of soda.

Question 18

A relative price is the

A) slope of the demand curve.
B) difference between one money price and another.
C) slope of the supply curve.
D) ratio of one money price to another.

Question 19

Suppose the price of a football is $20.00 and the price of a basketball is $10.00. The ________ of a football is ________.

A) relative price; 2 basketballs per football
B) relative price; 1/2 basketball per football
C) opportunity cost; $20.00
D) opportunity cost; $10.00

Question 20

The money price of a pizza is $12 per pizza and the money price of a taco is $2 per taco. The relative price of a pizza is

A) $12 per pizza.
B) $24 per pizza.
C) 6 tacos per pizza.
D) 1/6 pizza per taco.

Question 21

When the price of a pizza decreases from $12 to $10, it is definitely the case that the

A) income effect means people buy less pizza.
B) substitution effect means people buy more pizza.
C) quantity demanded of pizza will not change.
D) None of the above answers is correct.

Question 22

The "law of demand" states that, other things remaining the same, the quantity demanded of any good is

A) inversely related to its price.
B) directly related to its price.
C) positively related to its price.
D) directly related to the supply of the good.

Question 23

The law of demand states that, other things remaining the same, the higher the price of a good, the

A) smaller is the demand for the good.
B) larger is the demand for the good.
C) smaller is the quantity of the good demanded.
D) larger is the quantity of the good demanded.

Question 24

The price of cereal rises. As a result, people have cereal for breakfast on fewer days and eat eggs instead. This behavior is an example of

A) a decrease in the quantity demanded of cereal because of the substitution effect.
B) an increase in the quantity demanded of eggs because of the income effect.
C) a decrease in the quantity supplied of cereal because of the substitution effect.
D) an increase in the quantity supplied of eggs because of the income effect.

Question 25

The law of demand implies that if nothing else changes, there is

A) a positive relationship between the price of a good and the quantity demanded.
B) a negative relationship between the price of a good and the quantity demanded.
C) a linear relationship between price of a good and the quantity demanded.
D) an exponential relationship between price of a good and the quantity demanded.

Question 26

As the relative price of a good falls, the substitution effect implies that people buy

A) less of that good and more of its substitutes.
B) more of that good and less of its substitutes.
C) less of that good and less of its substitutes.
D) more of that good and more of its substitutes.

Question 27

The "law of demand" states that changes in

A) demand are related directly to changes in supply.
B) the quantity demanded of a good are not related to changes in the quantity supplied.
C) the quantity demanded of a good are inversely related to changes in its price.
D) demand are inversely related to changes in supply.

Question 28

The law of demand states that the quantity of a good demanded varies

A) inversely with its price.
B) inversely with the price of substitute goods.
C) directly with income.
D) directly with population.

Question 29

The quantity demanded of a good or service is the amount that

A) a consumer would like to buy but might not be able to afford.
B) is actually bought during a given time period at a given price.
C) consumers plan to buy during a given time period at a given price.
D) firms are willing to sell during a given time period at a given price.

Question 30

The law of demand implies that, other things remaining the same,

A) as the price of a cheeseburger rises, the quantity of cheeseburgers demanded will increase.
B) as the price of a cheeseburger rises, the quantity of cheeseburgers demanded will decrease.
C) as income increases, the quantity of cheeseburgers demanded will increase.
D) as the demand for cheeseburgers increases, the price of a cheeseburger will fall.

Question 31

The "law of demand" predicts that, other things being equal,

A) an increase in the price of downloaded music decreases the demand for downloaded music.
B) a decrease in the price of gasoline decreases the quantity of gasoline demanded.
C) an increase in the price of pizza decreases the quantity of pizza demanded.
D) an increase in the price of coffee decreases the quantity of tea demanded.

Question 32

Scarcity guarantees that

A) demands will exceed wants.
B) wants will exceed demands.
C) demands will be equal to wants.
D) most demands will be satisfied.

Question 33

The law of demand implies that demand curves

A) slope down.
B) slope up.
C) shift rightward whenever the price rises.
D) shift leftward whenever the price rises.

Question 34

The quantity demanded is

A) always equal to the equilibrium quantity.
B) independent of the price of the good.
C) the amount of a good that consumers plan to purchase at a particular price.
D) independent of consumers' buying plans.

Question 35

The "law of demand" refers to the fact that, all other things remaining the same, when the price of a good rises

A) the demand curve shifts rightward.
B) the demand curve shifts leftward.
C) there is a movement down along the demand curve to a larger quantity demanded.
D) there is a movement up along the demand curve to a smaller quantity demanded.

Question 36

The "law of demand" states that, other thing remaining the same, the higher

A) the price of a good, the lower is the demand for this good.
B) consumers' incomes, the greater is the demand.
C) the price of a good, the higher is the quantity demanded.
D) the price of a good, the smaller is the quantity demanded.

Question 37

When graphing a demand curve for corn, we are showing the relationship between the quantity demanded of corn and the

A) money price of corn.
B) relative price of corn.
C) income effect.
D) substitution effect.

Question 38

Demands differ from wants because

A) demands are unlimited, whereas wants are limited by income.
B) wants require a plan to acquire a good but demands require no such plan.
C) wants imply a decision about which demands to satisfy, while demands involve no specific plan to acquire the good.
D) demands reflect a decision about which wants to satisfy and a plan to buy the good, while wants are unlimited and involve no specific plan to acquire the good.

Question 39

Which of the following is consistent with the law of demand?

A) An increase in the price of a DVD causes an increase in the quantity of DVDs demanded.
B) An increase in the price of a soda causes a decrease in the quantity of soda demanded.
C) A decrease in the price of a gallon of milk causes a decrease in the quantity of milk demanded.
D) A decrease in the price of juice causes no change in the quantity of juice demanded.

Question 40

The "law of demand" is illustrated by a

A) rightward shift of the demand curve.
B) leftward shift of the demand curve.
C) movement along the demand curve.
D) Both answers A and B are correct.

Question 41

Ham and eggs are complements. If the price of ham rises, the demand for eggs will

A) increase or decrease but the demand curve for ham will not change.
B) decrease and the demand curve for ham will shift rightward.
C) not change but there will be a movement along the demand curve for eggs.
D) decrease and the demand curve for eggs will shift leftward.

Question 42

What happens to the demand for Xbox games if the price of an Xbox falls?

A) The demand for Xboxes decreases because the price of a substitute falls.
B) The demand for Xboxes increases because the price of a complement falls.
C) The demand for Xboxes decreases because the price of a complement falls.
D) The demand for Xboxes remains unchanged.

Question 43

When the price of a pizza decreases from $14 to $12,

A) the income effect means people buy less pizza.
B) the income effect points out that the total purchasing power of people who buy pizza increases.
C) the income effect means that the demand for pizza will not change.
D) None of the above answers is correct.

Question 44

A complement is a good

A) of lower quality than another good.
B) used in conjunction with another good.
C) used instead of another good.
D) of higher quality than another good.

Question 45

When the price of a good falls, the income effect for a normal good implies that people buy

A) less of that good because the relative price of the good has fallen.
B) more of that good because the relative price of the good has risen.
C) less of that good because they cannot afford to buy all the things they previously bought.
D) more of that good because they can afford to buy more of all the things they previously bought.

Question 46

A substitute is a good

A) that can be used in place of another good.
B) that is not used in place of another good.
C) of lower quality than another good.
D) of higher quality than another good.

Question 47

When the price of an inferior good falls, the substitution effect leads to ________ in the quantity purchased and the income effect leads to ________ in the quantity purchased.

A) an increase; an increase
B) an increase; a decrease
C) a decrease; an increase
D) a decrease; a decrease

Question 48

Which of the following influences people's buying plans and does NOT shift the demand curve?

A) the price of the good
B) the prices of related goods
C) income
D) preferences

Question 49

A change in which of the following shifts the demand curve for hamburgers?

A) an increase in the price of the meat used to produce hamburgers
B) an increase in the price of a hamburger
C) a fall in the price of french fries, a complement for hamburgers
D) an increase in the number of hamburger restaurants

Question 50

Each point on the demand curve reflects

A) all the wants of a given household.
B) the highest price consumers are willing and able to pay for that particular unit of a good.
C) the highest price sellers will accept for all units they are producing.
D) the lowest-cost technology available to produce a good.

Question 51

In the market for magazines, the "income effect" means that

A) magazines are usually purchased by people with higher than average incomes.
B) a decrease in the price of a substitute product like books will make magazine readers feel a little poorer than they were before.
C) an increase in the price of magazines will reduce the total purchasing power of magazine readers, making them able to afford fewer magazines.
D) an increase in the price of magazines will raise the relative price of magazines to books, causing magazine readers to read more books and fewer magazines.

Question 52

Apples are a normal good, so if the price of an apple increases from 50¢ to 60¢, the quantity of apples demanded decrease because of

A) the substitution effect only.
B) the income effect only.
C) a change in income.
D) the substitution and income effects.

Question 53

The "income effect" in the market for aspirin means that

A) aspirin are generally taken by people with higher than average incomes.
B) a decrease in the price of a substitute good like acetaminophen will make aspirin takers feel a little poorer than they were before.
C) an increase in the price of aspirin will reduce the total purchasing power of aspirin takers, making them able to afford fewer aspirin.
D) an increase in the price of aspirin will cause headache sufferers to look for a lower priced remedy.

Question 54

Suppose people buy more of good 1 when the price of good 2 falls. These goods are

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

Question 55

The quantity of iPods that people plan to buy this month depends on all of the following EXCEPT the

A) price of CD players.
B) price of an iPod.
C) technology used to produce an iPod.
D) price of a music download from iTunes.

Question 56

Which of the following pairs of goods are most likely substitutes?

A) DVDs and DVD players
B) cola and lemon lime soda
C) lettuce and salad dressing
D) peanut butter and gasoline

Question 57

When the price of a normal good falls, the substitution effect leads to ________ in the quantity purchased and the income effect leads to ________ in the quantity purchased.

A) an increase; an increase
B) an increase; a decrease
C) a decrease; an increase
D) a decrease; a decrease

Question 58

People buy more of good 1 when the price of good 2 rises. These goods are

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

Question 59

Which of the following shifts the demand curve for oranges?

A) disastrous weather that destroys about half of this year's orange crop
B) a decrease in the price of a pound of bananas, a substitute in consumption for oranges
C) an increase in the price of the fuel used to transport oranges to supermarkets
D) great weather that produces a bumper orange crop this year

Question 60

For normal goods which of the following explains why demand curves slope downward?

A) prices and income
B) substitutes and complements
C) resources and technology
D) substitution effect and income effect

Question 61

The price of a tomato increases and people buy more lettuce. You infer that lettuce and tomatoes are ________.

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

Question 62

The demand for a good increases when the price of a substitute ________ and also increases when the price of a complement ________.

A) rises; rises
B) rises; falls
C) falls; rises
D) falls; falls

Question 63

If the price of chicken falls, then in the market for beef,

A) the demand curve for beef shifts rightward.
B) the demand curve for beef shifts leftward.
C) there is a movement downward along the demand curve for beef.
D) there is a movement upward along the demand curve for beef.

Question 64

Students can rent a Blu-ray movie at Campus Video for $4. As the price of Blu-ray players fall, the

A) quantity supplied of Blu-ray movies will decrease.
B) demand for Blu-ray movies will increase.
C) supply of Blu-ray movies will decrease.
D) quantity demanded of Blu-ray movies will increase.

Question 65

Cupcakes and granola bars are substitutes in consumption. The price of a granola bar increases so the demand for

A) granola bars will increase, that is, the demand curve will shift rightward.
B) cupcakes will increase, that is, the demand curve will shift rightward.
C) granola bars will decrease, that is, the demand curve will shift leftward.
D) cupcakes will decrease, that is, the demand curve will shift leftward.

Question 66

If consumers but not producers expect that the price of soda will rise in November, the

A) supply of soda in October will increase.
B) demand for soda in October will decrease.
C) demand for soda in October will increase.
D) supply of soda in October will decrease.

Question 67

A decrease in the expected future price of cars

A) increases the current quantity demanded of cars, that is, there is a movement downward along the demand curve for cars.
B) increases the current demand for cars, that is, there is a rightward shift of the demand curve for cars.
C) decreases the current quantity demanded of cars, that is, there is a movement upward along the demand curve for cars.
D) decreases the current demand for cars, that is, there is a leftward shift of the demand curve for cars.

Question 68

If the price of product X falls and this change increases the demand for product Y, then

A) X and Y are complements.
B) X and Y are substitutes.
C) X is an inferior good.
D) Y is an inferior good.

Question 69

A decrease in the price of bowling shifts the

A) demand curve for bowling balls leftward.
B) demand curve for bowling balls rightward.
C) supply curve of bowling balls leftward.
D) supply curve of bowling balls rightward.

Question 70

Which of the following shifts the demand curve for hot dogs leftward?

A) an increase in the price of a hot dog bun
B) a decrease in the price of a hot dog bun
C) an increase in the price of a hot dog
D) an increase in the price of a hamburger

Question 71

The demand curve for a normal good shifts leftward if income ________ or the expected future price ________.

A) decreases; falls
B) decreases; rises
C) increases; falls
D) increases; rises

Question 72

You observe that an increase in the price of salsa decreases the demand for tortilla chips and increases the demand for potato chips. You can conclude that

A) salsa and tortilla chips are substitutes.
B) salsa and potato chips are complements.
C) tortilla chips and potato chips are complements.
D) salsa and tortilla chips are complements.

Question 73

If the price of an Xbox player falls, then in the market for Xbox games,

A) the demand curve for Xbox games shifts rightward.
B) the demand curve for Xbox games shifts leftward.
C) there is a movement downward along the demand curve for Xbox games.
D) there is a movement upward along the demand curve for Xbox games.

Question 74

Oatmeal is a normal good and cold cereal is a substitute for oatmeal. Raisins are a complement for oatmeal. Which of the following increases the demand for oatmeal?

A) an increase in the price of raisins
B) a decrease in income
C) a decrease in population
D) an increase in the price of cold cereal

Question 75

Consumers expect that the price of a gallon of gasoline will rise next week. As a result,

A) today's supply of gasoline increases.
B) today's demand for gasoline increases.
C) the price of a gallon of gasoline falls today.
D) next week's supply of gasoline decreases.

Question 76

The observation that the demand curve for grape jelly shifts rightward every time the price of peanut butter falls means that grape jelly and peanut butter are

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

Question 77

Sweatshirts and tee-shirts are complements in consumption and the price of a sweatshirt increases. As a result, the demand for

A) sweatshirts will increase, that is, the demand curve will shift rightward.
B) tee-shirts will increase, that is, the demand curve will shift rightward.
C) sweatshirts will decrease, that is, the demand curve will shift leftward.
D) tee-shirts will decrease, that is, the demand curve will shift leftward.

Question 78

Which of the following increases the demand for a normal good?

A) a decrease in income
B) an decrease in the price of a substitute
C) an increase in the price of a complement
D) the price of the good is expected to increase in the future

Question 79

An increase in the expected future price of a good

A) increases its demand.
B) decreases its demand.
C) increases its supply.
D) has no effect on either its demand or its supply.

Question 80

If income increases or the price of a complement falls, the

A) demand curve for a normal good shifts leftward.
B) demand curve for a normal good shifts rightward.
C) supply curve of a normal good shifts leftward.
D) supply curve of a normal good shifts rightward.