Deck 3: The Supply and Demand Model

Question 1

Suppose you observe that taxi fares per trip increased when more commuters took taxis. Which of the following is the best possible explanation?

A) The law of demand was violated.
B) The law of supply was violated.
C) The price of gasoline went up.
D) People were irrational.
E) Commuters did not have any choice.

Answer 1

The price of gasoline went up.

Question 2

The law of demand states that, as the price of a product increases, consumers

A) buy more of that product.
B) buy less of that product.
C) buy more of other related products.
D) buy less of other related products.
E) may buy more or less of that product.

Answer 2

buy less of that product.

Question 3

According to the law of demand, if the price of compact disks decreased, ceteris paribus, the

A) demand for compact disks would decrease.
B) quantity demanded of compact disks would decrease.
C) demand for compact disks would increase.
D) quantity demanded of compact disks would not change.
E) quantity demanded of compact disks would increase.

Answer 3

quantity demanded of compact disks would increase.

Question 4

The law of demand is represented by

A) the positive slope of the demand curve.
B) the negative slope of the demand curve.
C) a shift of the demand curve to the right when price increases.
D) a shift of the demand curve to the left when price decreases.
E) a shift of the demand curve when income changes.

Question 5

The law of demand is violated when the demand for a product is high at a high price.

Question 6

A demand schedule is a table of prices and

A) minimum quantities people have purchased at each price.
B) quantities people are able to purchase at each price.
C) quantities people are willing to buy at each price.
D) quantities people have purchased at each price.
E) quantities people are willing to produce at each price.

Question 7

The demand curve for apples is downward-sloping because

A) when fewer apples are produced, the money in people's apple budgets does not have to stretch as far.
B) there must have been an apple blight, so there must be fewer apples to buy.
C) when apple prices rise, the price of other goods must also be rising, so people cannot afford to buy as much.
D) at higher apple prices, people will seek other, relatively cheaper alternatives, like pears, oranges, or plums.
E) at higher prices, apples are more expensive to produce, so fewer are grown.

Question 8

The law of demand states that

A) as price decreases, demand increases.
B) as price increases, quantity demanded increases.
C) there is a direct relationship between price and quantity supplied.
D) there is an inverse relationship between price and quantity demanded.
E) there is an inverse relationship between price and quantity supplied.

Question 9

According to the law of demand, when the price of a BMW or a Gucci purse increases, the quantity demanded for these goods will also increase because the goods have become more prestigious.

Question 10

The supply and demand model consists of the following three elements:

A) math, geometry, and simultaneous equations.
B) supply, demand, and production possibilities.
C) inputs, outputs, and production.
D) utility, profit maximization, and regulation.
E) price, quantity, and equilibrium.

Question 11

The term quantity demanded refers to

A) that point where the supply and demand curves cross.
B) the amount of a good consumers are willing to buy at a given price.
C) a particular demand schedule.
D) the entire demand curve.
E) the amount of a good people must forcibly demand from a producer in order to survive.

Question 12

According to the law of demand, one way to reduce the amount of tobacco consumption is to

A) lower the price of tobacco.
B) raise the price of tobacco.
C) subsidize users of tobacco.
D) subsidize treatments of diseases related to tobacco consumption.
E) make tobacco consumption illegal.

Question 13

The principle that consumers tend to buy less of a good or service when its price increases, all else held equal, is called the law of

A) preferences.
B) increasing cost.
C) demand.
D) supply.
E) maximum satisfaction.

Question 14

According to the law of demand, the price of a product increases when the quantity demanded increases.

Question 15

The typical slope of a demand curve

A) is positive.
B) is negative.
C) is zero.
D) is infinity.
E) depends on factors such as income and consumer expectations.

Question 16

Which of the following statements is false?

A) The supply and demand model serves to illustrate market behavior.
B) Supply and demand must be combined for either to be useful in explaining and predicting market behavior.
C) Supply illustrates the behavior of firms in a market.
D) Demand illustrates the behavior of consumers in a market.
E) Market equilibrium is not an important element of the supply and demand model.

Question 17

Which of the following is not held constant when constructing a demand curve for good X?

A) Price of good X
B) Consumer tastes
C) Prices of other goods
D) Consumer expectations
E) Consumer income

Question 18

Which of the following is not an element of the supply and demand model?

A) Price
B) Inputs
C) Market
D) Equilibrium
E) Quantity

Question 19

The relationship between price and quantity demanded, other things being equal, is

A) negative in some economies but positive in others.
B) negative in market-based economies but positive in regulated economies.
C) always negative in all economies.
D) positive in market-based economies but negative in regulated economies.
E) always positive in all economies.

Question 20

The demand schedule is a table or list of the prices and corresponding quantities demanded of a particular good or service.

Question 21

Suppose that Sunny D is an inferior good. Which of the following is true given an increase in consumer income?

A) An upward movement along the demand curve of Sunny D
B) A downward movement along the demand curve of Sunny D
C) A leftward shift in the demand curve of Sunny D
D) A rightward shift in the demand curve of Sunny D
E) No change in the demand curve of Sunny D

Question 22

Which of the following statements is false?

A) A demand curve is a visual representation of a demand schedule.
B) A demand curve is typically drawn with quantity demanded on the horizontal axis.
C) A demand curve is derived from different quantities produced.
D) A demand curve is typically drawn with price on the vertical axis.
E) A demand curve is always downward sloping.

Question 23

When economists say that the demand for a product has decreased, they mean that

A) consumers are going to purchase less at any given price.
B) the price has increased and consumers will purchase less of the product.
C) the demand curve has shifted to the right.
D) the product has become more abundant and consumers therefore want it less.
E) consumers would be willing to pay less to receive the same quantity.

Question 24

Which of the following leads to a leftward shift of the demand curve?

A) An expectation of a decline in the product price in the future
B) A decrease in the good's own price
C) An increase in the price of a substitute
D) A decrease in the price of a complement
E) An increase in the number of consumers

Question 25

When incomes are rising, new car sales increase while used car sales decrease. This indicates that

A) used cars and new cars are both normal goods.
B) used cars are inferior goods and new cars are normal goods.
C) used cars and new cars are complements.
D) used cars and new cars are substitutes.
E) used cars are normal goods and new cars are inferior goods.

Question 26

A demand curve is always flat.

Question 27

The demand curve is a relationship between the price of a good and the quantity consumers are willing to buy at that price.

Question 28

If the price of product X falls and this causes the demand for product Y to shift to the right, then we can conclude X and Y are

A) normal.
B) inferior.
C) complements.
D) substitutes.
E) not related.

Question 29

Which of the following will not increase the demand for a good?

A) An expectation of a decline in the product price in the future
B) The product price falls, ceteris paribus.
C) An increase in the price of a substitute
D) A decrease in the price of a complement
E) A foreign country opens its markets to imports from others.

Question 30

Consider the market for pop music played on compact discs. If there is a decrease in the number of pop music programs broadcast on radio, we can expect

A) the profits of the pop music industry to decrease.
B) the demand for pop music to decrease.
C) the demand for compact discs to increase.
D) less pop music to be listened to on compact discs.
E) the price of compact discs to decline.

Question 31

Which of the following will increase the demand for a normal good?

A) A decrease in the number of consumers
B) A decrease in the price of a substitute
C) An increase in consumer income
D) An increase in the price of a complement
E) An increase in the demand for a substitute

Question 32

Peanut butter and jelly are complements so that if the price of peanut butter increases, the

A) quantity demanded for jelly increases.
B) quantity demanded for jelly decreases.
C) demand for jelly increases.
D) demand for jelly decreases.
E) demand for jelly remains the same.

Question 33

The demand for goods sold in Dollar Stores increases when consumer incomes fall in a recession. We can conclude that goods sold in Dollar Stores

A) are normal goods.
B) are luxury goods.
C) are inferior goods.
D) are complements of goods sold in department stores.
E) have no substitutes.

Question 34

The demand for apples shifts rightward when consumers react to a lower apple price by buying more.

Question 35

When consumers expect the price of a good to go down in the future, demand will

A) decrease in the future.
B) decrease today.
C) increase in the future.
D) not change.
E) increase today.

Question 36

The demand curve of good X is drawn by assuming that all of the following are equal except

A) the price of good X.
B) consumer income.
C) consumer preferences.
D) the price of good Y.
E) the number of consumers.

Question 37

A demand curve represents the relationship between consumer income and the quantity demanded.

Question 38

Coffee and tea are substitutes so that if the price of tea increases, the

A) quantity demanded for coffee increases.
B) quantity demanded for coffee decreases.
C) demand for coffee increases.
D) demand for coffee decreases.
E) demand for coffee remains the same.

Question 39

The slope of a demand curve can be positive, negative, or zero.

Question 40

If an increase in the price of product X causes an increase in the demand for product Y, we can conclude that

A) they are inferior goods.
B) the price of Y will decrease.
C) they are complements.
D) they are substitutes.
E) the quantity supplied for Y will decrease.

Question 41

Suppose demand is represented by the following equation:
Q_D = 1000 - 0.8P
Write a different equation that illustrates a decrease in demand relative to the original equation.

Question 42

If the price of ice cream decreases, then the

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

Question 43

Which of the following causes a movement along the demand curve for apples?

A) Consumers expect an increase in the price of apples.
B) Consumer income decreases.
C) The price of apples increases.
D) The price of oranges decreases.
E) The supply of apples increases.

Question 44

If goods A and B are substitutes, then the demand for good A increases when the price of good B decreases.

Question 45

If the demand curve for product J shifts to the left as the price of product K increases, then J and K are complementary goods.

Question 46

An increase in demand is graphically illustrated by

A) a shift of the demand curve to the right.
B) a shift of the demand curve to the left.
C) an upward movement along the demand curve.
D) a downward movement along the demand curve.
E) both a shift and an upward movement along the demand curve.

Question 47

A higher price leads to a leftward shift of the demand curve.

Question 48

An increase in consumer income causes a movement up along the demand curve.

Question 49

When economists say that the demand for a product has increased, they mean that consumers are willing to buy more of the product at any given price.

Question 50

If the price of a product decreases, then the demand curve shifts to the right.

Question 51

Economists use the term supply to refer to

A) the upward-sloping line that relates consumer expenditures to different output levels.
B) the downward-sloping line that relates consumer expenditures to different output levels.
C) a set of price and quantity supplied combinations, everything else held equal.
D) the amount producers are willing but not able to produce at each price.
E) a particular quantity supplied at a specific price.

Question 52

According to the law of supply, if the price of personal computers increased, ceteris paribus,

A) the quantity supplied of personal computers would not change.
B) the quantity supplied of personal computers would decrease.
C) the supply of personal computers would decrease.
D) the quantity supplied of personal computers would increase.
E) the supply of personal computers would increase.

Question 53

List four factors that affect willingness to buy and that shift the demand curve.

Question 54

Why does the law of demand hold?

Question 55

Which of the following will not cause the demand for ice cream to change?

A) A change in population size
B) A change in the price of ice cream
C) A change in consumer incomes
D) A change in the price of yogurt
E) A change in seasons

Question 56

The demand curve for a particular good shifts when any factor other than the price of that good changes.

Question 57

The law of supply states that

A) price and quantity supplied are inversely related.
B) price and supply are positively related.
C) the higher the price, the smaller the quantity that will be sold.
D) price and quantity supplied are positively related.
E) price and quantity demanded are inversely related.

Question 58

Which of the following statements is true?

A) An increase in quantity demanded means a movement along a given demand curve.
B) An increase in demand means a movement along a given demand curve.
C) An increase in demand means that consumers will purchase less of a product at each possible price.
D) Price and quantity demanded are positively related.
E) An increase in demand always means the same as an increase in quantity demanded.

Question 59

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

Question 60

What is the principle that explains the relationship between price and quantity demanded?

Question 61

All else held equal, if the price of sirloin steak increases from $4.25 to $8.60 per pound, a greater quantity of sirloin steak will be supplied.

Question 62

The supply curve slopes downward because sellers attempt to sell more when price drops.

Question 63

The supply curve for iPhones is upward-sloping because

A) when the price of an iPhone rises, it must be due to increased costs in producing iPhones, so producers must charge more.
B) a higher iPhone price gives shoe producers incentive to produce more iPhones.
C) iPhones are produced by only a few producers.
D) iPhone producers always want to satisfy the demand for iPhones by consumers.
E) as the price of an iPhone rises, per-unit costs of production fall.

Question 64

Which of the following is not held constant when constructing a supply curve for good X?

A) Number of firms producing good X
B) Price of inputs
C) Price of good X
D) Producer expectations
E) Production technology

Question 65

The supply curve

A) has quantity produced on the vertical axis.
B) is a graph of a supply schedule.
C) represents production quotas.
D) sometimes slopes downward.
E) is always a straight line.

Question 66

The positive relationship between price and quantity supplied, other things being equal, is considered to be

A) universally true for all markets.
B) never true in heavily regulated markets.
C) sometimes true in all markets.
D) true only in market-based economies.
E) true only when consumers act irrationally.

Question 67

The supply curve represents the relationship between the quantities of a good that sellers are willing and able to supply and different prices of that good.

Question 68

A change in supply will not be caused by a(n)

A) change in the price producers believe will prevail in the future.
B) change in the price of inputs.
C) change in the number of producers.
D) increase in the number of consumers.
E) improvement in technology.

Question 69

Which of the following would not affect the supply of automobiles?

A) A decrease in the number of automobile producers
B) An increase in the price of steel
C) An increase in the productivity of workers
D) An increase in the price of motor oil
E) An improvement in the technology of automobile manufacturing

Question 70

Suppose all blue-collar workers receive a substantial pay increase. What will happen in the product markets that employ these workers?

A) Supply will decrease.
B) Supply will increase.
C) Output will rise.
D) Demand will decrease.
E) Prices will fall.

Question 71

Which of the following causes a leftward shift of the supply curve?

A) An increase in the number of producers
B) An increase in the cost of production
C) A government subsidy on production
D) An increase in the price of the good being sold
E) An improvement in production technology

Question 72

The principle that producers sell more of a good or service when the price increases, all else held equal, is called the law of

A) increasing profit.
B) supply.
C) demand.
D) opportunity cost.
E) reduced real income.

Question 73

Other things being equal, the quantity supplied decreases as price increases.

Question 74

A supply schedule is a

A) table of prices and quantities people are willing to sell at each price.
B) graph of prices and quantities supplied.
C) graph of costs and associated quantities supplied.
D) table of prices and quantities people are willing to buy at each price.
E) graph of prices and revenues.

Question 75

If the government decides to pay producers of houses $2,000 for every house they produce,

A) the opportunity cost of producing a house will fall.
B) demand for housing will increase.
C) housing will no longer be scarce.
D) consumers will buy more houses, even if the price does not fall.
E) producers will be willing to build more houses, even if the price does not rise.

Question 76

If a drought in Florida reduces the amount of oranges grown, then

A) the demand curve of Florida oranges shifts to the left.
B) the demand curve of Florida oranges shifts to the right.
C) the supply curve of Florida oranges shifts to the left.
D) the supply curve of Florida oranges shifts to the right.
E) both the supply and demand curve of Florida oranges shift to the right.

Question 77

Which of the following will not cause the supply of long-distance telephone service to increase?

A) A reduction in the number of long-distance companies
B) A reduction in space shuttle fees to launch telecommunications satellites
C) A decrease in the price of computer electronics used to route long-distance calls
D) A decrease in the number of government regulations on long-distance telephoning services
E) A reduction in the price of fiber-optic cables over which phone messages are sent

Question 78

The term quantity supplied refers to

A) the minimum quantity producers must sell in order to stay in business.
B) the quantity where the supply and demand curves cross.
C) a supply schedule.
D) the entire supply curve.
E) the amount of a good producers are willing to sell at a given price.

Question 79

According to the law of supply, if the price of calculators decreased, the supply of calculators would decrease, everything else held equal.

Question 80

The law of supply states that the quantity supplied of a good is positively related to the price of that good.