Deck 3: Where Prices Come From: the Interaction of Demand and Supply

Question 1

The income effect of a price change refers to the impact of a change in

A)income on the price of a good.
B)demand when income changes.
C)the quantity demanded when income changes.
D)the price of a good on a consumer's purchasing power.

Answer 1

the price of a good on a consumer's purchasing power.

Question 2

Table 3-1

Refer to Table 3-1.The table above shows the demand schedules for loose-leaf tea of two individuals (Sunil and Mia)and the rest of the market.If the price of loose-leaf tea rises from $3 to $4, the market quantity demanded would

A)decrease by 32 lbs.
B)increase by 64 lbs.
C)increase by 32 lbs.
D)decrease by 64 lbs.

Answer 2

decrease by 32 lbs.

Question 3

If the price of grapefruit rises, the substitution effect due to the price change will cause

A)a decrease in the demand for grapefruit.
B)a decrease in the demand for oranges, a substitute for grapefruit.
C)a decrease in the quantity of grapefruit demanded.
D)a decrease in the quantity of grapefruit supplied.

Answer 3

a decrease in the quantity of grapefruit demanded.

Question 4

The ________ effect refers to the change in quantity demanded for a good that results from the effect of a change in the good's price on consumers' purchasing power.

A)ceteris paribus
B)population
C)substitution
D)income

Question 5

What is the difference between an "increase in demand" and an "increase in quantity demanded"?

A)There is no difference between the two terms; they both refer to a shift of the demand curve.
B)An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve.
C)There is no difference between the two terms; they both refer to a movement downward along a given demand curve.
D)An "increase in demand" is represented by a movement along a given demand curve, while an "increase in quantity demanded" is represented by a rightward shift of the demand curve.

Question 6

When the price of a normal good falls, consumers buy a larger quantity because of the ________ effect and the ________ effect.

A)substitution; income
B)normal; inferior
C)substitute; complement
D)supply; demand

Question 7

The demand by all the consumers of a given good or service is the ________ for the good or service.

A)market demand
B)quantity demanded
C)law of demand
D)scheduled demand

Question 8

By 2017, Pepsi and Coke were attempting to increase their profits in the bottled water market by introducing premium water brands.Pepsi and Coke introduced LIFEWTR and Smartwater, respectively, while competitors like Nestle and Danone produced their own versions of premium water.The premium water brands marketed to compete with LIFEWTR and Smartwater would be considered

A)complements to LIFEWTR and Smartwater.
B)substitutes for LIFEWTR and Smartwater.
C)inferior goods compared to LIFEWTR and Smartwater.
D)normal goods compared to LIFEWTR and Smartwater.

Question 9

A movement along the demand curve for toothpaste would be caused by

A)a change in the price of toothbrushes.
B)a change in consumer income.
C)a change in the price of toothpaste.
D)a change in population.

Question 10

Holding everything else constant, an increase in the price of MP3 players will result in

A)a decrease in the quantity of MP3 players supplied.
B)a decrease in the demand for MP3 players.
C)an increase in the supply of MP3 players.
D)a decrease in the quantity of MP3 players demanded.

Question 11

If the amount of carbonated sodas consumed continues to decline as consumers continue to choose to buy healthier products, this will likely

A)increase the demand for premium water, because premium water and carbonated sodas are considered complements.
B)increase the demand for premium water, because premium water and carbonated sodas are considered substitutes.
C)decrease the demand for premium water, because premium water is considered an inferior good and carbonated sodas are considered normal goods.
D)decrease the demand for premium water, because premium water is considered a normal good and carbonated sodas are considered inferior goods.

Question 12

The law of demand implies, holding everything else constant, that as the price of bagels increases.

A)the quantity of bagels demanded will decrease.
B)the demand for bagels will decrease.
C)the quantity of bagels demanded will increase.
D)the demand for bagels will increase.

Question 13

A change in all of the following variables will change the market demand for a product except

A)the price of the product.
B)population and demographics.
C)income.
D)tastes.

Question 14

By drawing a demand curve with ________ on the vertical axis and ________ on the horizontal axis, economists assume that the most important determinant of the demand for a good is the ________ of the good.

A)quantity; price; quantity
B)price; quantity; quantity
C)price; quantity; price
D)quantity; price; price

Question 15

If a demand curve shifts to the right, then

A)demand has increased.
B)quantity demanded has increased.
C)demand has decreased.
D)quantity demanded has decreased.

Question 16

Which of the following will shift the demand curve for a good?

A)a change in the technology used to produce the good
B)an increase in the price of the good
C)a decrease in the price of a complementary good
D)a decrease in the price of the good

Question 17

If the price of orchids falls, the substitution effect due to the price change will cause

A)an increase in the demand for orchids.
B)an increase in the demand for roses, a substitute for orchids.
C)an increase in the quantity of orchids demanded.
D)an increase in the quantity of orchids supplied.

Question 18

If a demand curve shifts to the left, then

A)demand has increased.
B)quantity demanded has increased.
C)demand has decreased.
D)quantity demanded has decreased.

Question 19

If, in response to an increase in the price of chocolate, the quantity of chocolate demanded decreases, then economists would describe this as

A)a decrease in demand.
B)a decrease in quantity demanded.
C)a change in consumer income.
D)a decrease in consumers' taste for chocolate.

Question 20

Table 3-1

Refer to Table 3-1.The table above shows the demand schedules for loose-leaf tea of two individuals (Sunil and Mia)and the rest of the market.At a price of $5, the quantity demanded in the market would be

A)51 lbs.
B)63 lbs.
C)76 lbs
D)146 lbs.

Question 21

If an increase in income leads to in an increase in the demand for peanut butter, then peanut butter is

A)a neutral good.
B)a normal good.
C)a necessity.
D)a complement.

Question 22

Technological advances have resulted in lower prices for digital cameras.What is the impact of this on the market for traditional (non-digital)cameras?

A)The demand curve for traditional cameras shifts to the right.
B)The supply curve for traditional cameras shifts to the right.
C)The demand curve for traditional cameras shifts to the left.
D)The supply curve for traditional cameras shifts to the left.

Question 23

If the price of automobiles was to increase, then

A)the demand for gasoline would decrease.
B)the demand for gasoline would increase.
C)the supply of gasoline would increase.
D)the quantity of gasoline demanded would decrease.

Question 24

Figure 3-1

Refer to Figure 3-1.A decrease in the price of a complementary good would be represented by a movement from

A)A to B.
B)B to A.
C)D₁ to D₂.
D)D₂ to D₁.

Question 25

If the price of music downloads was to decrease, then

A)the demand for MP3 players would decrease.
B)the demand for MP3 players would increase.
C)the supply of MP3 players would increase.
D)the quantity of MP3 players demanded would decrease.

Question 26

The Internet has created a new category in the book selling market, namely, the "barely used" book.How does the availability of barely used books affect the market for new books?

A)The demand curve for new books shifts to the right.
B)The demand curve for new books shifts to the left.
C)The supply curve for new books shifts to the right.
D)The supply curve for new books shifts to the left.

Question 27

If an increase in income leads to a decrease in the demand for popcorn, then popcorn is

A)an inferior good.
B)a neutral good.
C)a necessity.
D)a normal good.

Question 28

Studies have shown links between calcium consumption and a reduction in osteoporosis.How does this affect the market for calcium?

A)The calcium supply curve shifts to the right because of a change in tastes in favor of calcium.
B)The calcium demand curve shifts to the right because of a change in tastes in favor of calcium.
C)The calcium demand curve shifts to the left because this new information will increase the price of calcium.
D)The calcium supply curve shifts to the left because this new information will increase the price of calcium.

Question 29

How does the increasing use of MP3 players affect the market for compact discs?

A)The demand curve for compact discs shifts to the right.
B)The supply curve for compact discs shifts to the left.
C)The supply curve for compact discs shifts to the right.
D)The demand curve for compact discs shifts to the left.

Question 30

Figure 3-1

Refer to Figure 3-1.A decrease in the price of a substitute good would be represented by a movement from

A)A to B.
B)B to A.
C)D₁ to D₂.
D)D₂ to D₁.

Question 31

Figure 3-1

Refer to Figure 3-1.If the product represented is a normal good, a decrease in income would be represented by a movement from

A)A to B.
B)B to A.
C)D₁ to D₂.
D)D₂ to D₁.

Question 32

Figure 3-1

Refer to Figure 3-1.A decrease in taste or preference would be represented by a movement from

A)A to B.
B)B to A.
C)D₁ to D₂.
D)D₂ to D₁.

Question 33

Figure 3-1

Refer to Figure 3-1.A decrease in the price of the product would be represented by a movement from

A)A to B.
B)B to A.
C)D₁ to D₂.
D)D₂ to D₁.

Question 34

Tomas increased his consumption of potato chips when the price of pistachios increased.For Tomas, potato chips and pistachios are

A)substitutes.
B)both inferior goods.
C)complements.
D)both luxury goods.

Question 35

Figure 3-1

Refer to Figure 3-1.An increase in the expected future price of the product would be represented by a movement from

A)A to B.
B)B to A.
C)D₁ to D₂.
D)D₂ to D₁.

Question 36

Elvira decreased her consumption of bananas when the price of peanut butter increased.For Elvira, peanut butter and bananas are

A)substitutes.
B)both inferior goods.
C)complements.
D)both luxury goods.

Question 37

Suppose that when the price of hamburgers decreases, the Ruiz family increases their purchases of ketchup.To the Ruiz family,

A)hamburgers and ketchup are complements.
B)hamburgers and ketchup and substitutes.
C)hamburgers and ketchup are normal goods.
D)hamburgers are normal goods and ketchup is an inferior good.

Question 38

Figure 3-1

Refer to Figure 3-1.An increase in population would be represented by a movement from

A)A to B.
B)B to A.
C)D₁ to D₂.
D)D₂ to D₁.

Question 39

Suppose that when the price of raspberries increases, Lonnie increases his purchases of papayas.To Lonnie,

A)raspberries and papayas are complements.
B)raspberries and papayas are inferior goods.
C)raspberries and papayas are normal goods.
D)raspberries and papayas are substitutes.

Question 40

Figure 3-1

Refer to Figure 3-1.If the product represented is an inferior good, an increase in income would be represented by a movement from

A)A to B.
B)B to A.
C)D₁ to D₂.
D)D₂ to D₁.

Question 41

In June, buyers of titanium expect that the price of titanium will fall in July.What happens in the titanium market in June, holding everything else constant?

A)The demand curve shifts to the right.
B)The quantity demanded increases.
C)The quantity demanded decreases.
D)The demand curve shifts to the left.

Question 42

In January, buyers of gold expect that the price of gold will rise in February.What happens in the gold market in January, holding all else constant?

A)The supply curve shifts to the right.
B)The demand curve shifts to the left.
C)The demand curve shifts to the right.
D)The quantity demanded increases.

Question 43

A change in which variable will change the market demand for a product?

A)the price of the product
B)population
C)technology
D)the prices of substitutes in production

Question 44

Technological advancements have led to lower prices and an increase in the sale of digital cameras.How does this affect the digital photo printing paper market?

A)The demand curve for digital photo printing paper shifts to the right.
B)The demand curve for digital photo printing paper shifts to the left.
C)The supply curve for digital photo printing paper shifts to the right.
D)The supply curve for digital photo printing paper shifts to the left.

Question 45

Table 3-2

Refer to Table 3-2.The table above shows the demand schedules for caviar of two individuals (Ari and Sonia)and the rest of the market.At a price of $75, the quantity demanded in the market would be

A)6 oz.
B)46 oz.
C)52 oz.
D)127 oz.

Question 46

Factors that will tend to lead to higher demand for premium bottled water include all of the following except

A)the popularity of the product with millennials.
B)taxes on sodas that cities have been imposing.
C)doubts about the benefits of ingredients such as electrolytes which are not found in regular bottled water.
D)the possibility of attracting consumers who now prefer energy drinks and sports drinks.

Question 47

For products like virtual reality headsets, ________ products such as games produced for use with the headsets have shown to be needed for the headsets to compete with ________ products like game consoles.

A)complementary; complementary
B)complementary; substitute
C)substitute; complementary
D)substitute; substitute

Question 48

Which of the following generation categories has the largest population in the United States in 2017?

A)the millennials
B)generation X
C)the baby boomers
D)the centenarians

Question 49

The law of demand implies, holding everything else constant, that as the price of gelato

A)increases, the demand for gelato will increase.
B)increases, the quantity of gelato demanded will increase.
C)decreases, the quantity of gelato demanded will increase.
D)decreases, the demand for gelato will increase.

Question 50

Holding everything else constant, a decrease in the price of bicycles will result in

A)a decrease in the quantity of bicycles demanded.
B)an increase in the demand for bicycles.
C)a decrease in the supply of bicycles.
D)an increase in the quantity of bicycles demanded.

Question 51

Due to wildfires in Northern California, agricultural experts predict a 30 percent decline in this year's grape harvest.What happens in the California wine market as a result of this announcement?

A)The demand curve for California wine shifts to the left in anticipation of higher prices in the future.
B)The demand curve for California wine shifts to the right in anticipation of higher prices in the future.
C)The supply curve for California wine shifts to the right in anticipation of higher prices in the future.
D)The supply curve for California wine shifts to the left in anticipation of lower quantities in the future.

Question 52

The phrase "demand has decreased" means that

A)a demand curve has shifted to the left.
B)there has been an upward movement along a demand curve.
C)there has been a downward movement along a demand curve.
D)a demand curve has shifted to the right.

Question 53

Table 3-2

Refer to Table 3-2.The table above shows the demand schedules for caviar of two individuals (Ari and Sonia)and the rest of the market.At a price of $55, the quantity demanded in the market would be

A)42 oz.
B)136 oz.
C)178 oz.
D)233 oz.

Question 54

If a decrease in income leads to a decrease in the demand for mac and cheese, then mac and cheese is

A)a normal good.
B)a neutral good.
C)a complement.
D)a necessity.

Question 55

If, in response to a decrease in the price of grapes, the quantity of grapes demanded increases, then economists would describe this as

A)an increase in demand.
B)an increase in quantity demanded.
C)a change in consumer income.
D)an increase in consumers' taste for grapes.

Question 56

Table 3-2

Refer to Table 3-2.The table above shows the demand schedules for caviar of two individuals (Ari and Sonia)and the rest of the market.If the price of caviar falls from $45 to $35, the market quantity demanded would

A)decrease by 50 oz.
B)increase by 70 oz.
C)increase by 50 oz.
D)decrease by 70 oz.

Question 57

Table 3-2

Refer to Table 3-2.The table above shows the demand schedules for caviar of two individuals (Ari and Sonia)and the rest of the market.If the price of caviar rises from $65 to $75, the market quantity demanded would

A)decrease by 36 oz.
B)increase by 52 oz.
C)increase by 36 oz.
D)decrease by 52 oz.

Question 58

A(n)________ is represented by a leftward shift of the demand curve while a(n)________ is represented by a movement along a given demand curve.

A)decrease in demand; increase in demand
B)decrease in demand; increase in quantity demanded
C)increase in demand; decrease in quantity demanded
D)decrease in quantity demanded; decrease in demand

Question 59

Which of the following has occurred as the millennial generation has come of age?

A)The demand for "fast casual" food has decreased in the U.S. market.
B)The demand for golf equipment has decreased in the U.S. market.
C)The demand for traditional fast food has increased in the U.S. market.
D)all of the above

Question 60

Tom Searchinger, a senior attorney at the Environmental Defense Fund, observed that generous farm subsidies have encouraged farmers to produce more corn and more wheat.How does this affect the market for fertilizer?

A)The supply of fertilizer increases.
B)The supply of fertilizer decreases.
C)The demand for fertilizer increases.
D)The demand for fertilizer decreases.

Question 61

If the price of gasoline decreases, what will be the impact in the market for public transportation?

A)The demand curve for public transportation shifts to the right.
B)The quantity of public transportation demanded increases.
C)The demand curve for public transportation shifts to the left.
D)The quantity of public transportation demanded decreases.

Question 62

An inferior good is a good for which the quantity demanded decreases as the price increases, holding everything else constant.

Question 63

Explain the difference between a normal good and an inferior good.

Question 64

If the price of peaches, a substitute for plums, decreases the demand for plums will increase.

Question 65

The substitution effect explains why there is a direct relationship between the price of a product and the quantity of the product demanded.

Question 66

If the price of refillable butane lighters was to decrease, then

A)the demand for butane would decrease.
B)the demand for butane would increase.
C)the quantity of butane demanded would increase.
D)the quantity of butane demanded would decrease.

Question 67

How does the decreasing use of traditional cameras affect the market for traditional camera film?

A)The demand curve for traditional camera film shifts to the right.
B)The quantity of traditional camera film demanded decreases.
C)The quantity of traditional camera film demanded increases.
D)The demand curve for traditional camera film shifts to the left.

Question 68

The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in purchasing power as a result of the price change.

Question 69

For each of the following pairs of products, state which are complements, which are substitutes, and which are unrelated.
a.Digital camera and memory card
b.7Up and Mountain Dew
c.Swimsuits and flip-flops
d.Tylenol and cat food
e.Photocopier and paper

Question 70

What is the ceteris paribus condition?

Question 71

Suppose that when the price of hamburgers decreases, the Landry family decreases their purchases of chicken nuggets.To the Landry family

A)hamburgers and chicken nuggets are complements.
B)hamburgers and chicken nuggets are inferior goods.
C)hamburgers and chicken nuggets are normal goods.
D)hamburgers and chicken nuggets are substitutes.

Question 72

Chips and salsa are complements.If the price of salsa decreases, the demand for chips will increase.

Question 73

If consumers believe the price of LCD televisions will decrease in the future, this will cause the demand for LCD televisions to increase now.

Question 74

If a decrease in income leads to an increase in the demand for sardines, then sardines are

A)an inferior good.
B)a neutral good.
C)a necessity.
D)a normal good.

Question 75

The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in the price of a complementary product.

Question 76

Suppose that when the price of strawberries decreases, Simone increases her purchase of whipped cream.To Simone

A)strawberries and whipped cream are complements.
B)strawberries and whipped cream and substitutes.
C)strawberries and whipped cream are normal goods.
D)strawberries are a normal good and whipped cream is an inferior good.

Question 77

A normal good is a good for which the demand increases as income decreases, holding everything else constant.

Question 78

The income effect explains why there is an inverse relationship between the price of a normal good and the quantity of the good demanded.

Question 79

If consumers believe the price of iPads will decrease in the future, this will cause the demand for iPads to decrease now.

Question 80

What are the two effects that explain the law of demand? Briefly explain each effect.