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

Question 1

The market for smart phones has grown rapidly over the past few years, due in part to the overwhelming success of the Apple iPhone.Following the successful launch of the iPhone in 2007, companies such as Samsung, HTC, and LG have all introduced products to compete with the iPhone.The smart phones introduced to compete with the iPhone would be considered________.

A)complements to the iPhone.
B)substitutes for the iPhone.
C)inferior goods compared to the iPhone.
D)normal goods compared to the iPhone.

Answer 1

substitutes for the iPhone.

Question 2

If the Apple iPhone and the Samsung Galaxy are considered substitutes, then, other things equal, an increase in the price of the iPhone will:

A)decrease the demand for the iPhone.
B)increase the demand for the Galaxy.
C)increase the quantity demanded for the Galaxy.
D)increase the quantity demanded for the iPhone.

Answer 2

increase the demand for the Galaxy.

Question 3

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.

Answer 3

a normal good.

Question 4

If, in response to an increase in the price of chocolate, the quantity of chocolate demanded decreases, 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 5

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 6

What factor 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 7

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 8

When the price of a 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 9

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

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

Question 10

A change in each 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 11

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 12

What results when a demand curve shifts to the left?

A)Demand increases
B)Quality demand increases
C)Demand decreases
D)Quality demand decreases

Question 13

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 14

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 15

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 demanded of grapefruit.
D)a decrease in the quantity supplied of grapefruit.

Question 16

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 17

Which term best describes the demand by all the consumers of a given good or service?

A)Market demand
B)Quantity demanded
C)Law of demand
D)Scheduled demand

Question 18

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 19

Figure 3.1
Refer to Figure 3.1.Which movement would signal an increase in population?

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

Question 20

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.

Question 21

Suppose that when the price of blueberries increases, Lonnie increases his purchases of bananas.To Lonnie,

A)blueberries and bananas are complements.
B)blueberries and bananas are inferior goods.
C)blueberries and bananas are normal goods.
D)blueberries and bananas are substitutes.

Question 22

An online bookseller has created a new category, known as the 'barely used' book, in the book selling market.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 23

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 24

If bottled water is considered substitutes for soda, the decline in the price of bottled water would, all else equal,

A)increase the demand for soda.
B)decrease the demand for soda.
C)increase the quantity demanded for soda.
D)decrease the quantity demanded for soda.

Question 25

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 26

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 favour of calcium.
B)The calcium demand curve shifts to the right because of a change in tastes in favour 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 27

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 28

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 29

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 30

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 hot dogs are inferior goods.

Question 31

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

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

Question 32

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 demanded of MP3 players would decrease.

Question 33

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 34

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 35

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 36

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 37

Figure 3.1
Refer to Figure 3.1.Which movement reflects a decrease in the price of a substitute good?

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

Question 38

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

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

Question 39

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 40

How does the increasing use of e-books affect the market for hardcover books?

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

Question 41

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 42

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 43

If a decrease in income leads to in a decrease in the demand for pizza, then pizza is:

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

Question 44

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 an inferior product.

Question 45

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 46

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

Question 47

Hamburgers and mustard are complements.If the price of mustard decreases, the demand for hamburgers will increase.

Question 48

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 49

Suppose that when the price of chicken nuggets decreases, Simone increases her purchase of barbecue sauce.To Simone,

A)chicken nuggets and barbecue sauce are complements.
B)chicken nuggets and barbecue sauce and substitutes.
C)chicken nuggets and barbecue sauce are normal goods.
D)chicken nuggets are a normal good and barbecue sauce is an inferior good.

Question 50

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

A)Price of the product
B)Population
C)Technology
D)Prices of substitutes

Question 51

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 because of the price change.

Question 52

If, in response to a decrease in the price of grapes, the quantity of grapes demanded increases, 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 53

When deciding on which new products to develop, a firm must devote people, time, and money to designing a new product.Because any firm has only limited resources, it________.

A)should wait until its competitors develop a similar product before deciding on devoting resources to its own product development.
B)is not able to develop more than one new product at a time.
C)must be certain that the product it chooses to develop will be successful or it will not be able to stay in business.
D)faces a trade-off, because resources used to develop one product will not be available to develop another product.

Question 54

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 55

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

Question 56

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 57

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 58

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

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

Question 59

If the price of petrol 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 60

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

Question 61

Explain the difference between a normal good and an inferior good.
_____________________________________________________________________________________________
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Question 62

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

Question 63

What are the two effects that explain the Law of Demand? Briefly explain each effect.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Question 64

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

Question 65

For each of the following pairs of products, state which are complements, which are substitutes, and which are unrelated.
a.Blu-ray discs and video-on-demand
b.Fiat 500 and Mini Cooper S
c.Toothpaste and toothbrush
d.Popcorn and snowboards
e.Razors and razor blades
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Question 66

If in the market for apples, the supply curve has shifted to the left________.

A)the supply of apples has increased.
B)the supply of apples has decreased.
C)the quantity of apples supplied has increased.
D)the quantity of apples supplied has decreased.

Question 67

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

Question 68

A supply schedule________.

A)is a table that shows the relationship between the price of a product and the quantity of the product supplied.
B)is a curve that shows the relationship between the price of a product and the quantity of the product supplied.
C)is the relationship between the supply of a good and the cost of producing the good.
D)is a table that shows the relationship between the price of a product and the quantity of the product that producers and consumers are willing to exchange.

Question 69

In October, market analysts predict that the price of platinum will fall in November.What happens in the platinum market in October, holding everything else constant?

A)The supply curve shifts to the right.
B)The supply curve shifts to the left.
C)The quantity demanded and the quantity supplied of platinum increase.
D)The demand curve shifts to the right.

Question 70

Last year, the Pottery Palace supplied 8000 ceramic pots at $40 each.This year, the company supplied the same quantity of ceramic pots at $55 each.Based on this evidence, The Pottery Palace has experienced________.

A)a decrease in supply.
B)an increase in supply.
C)an increase in the quantity supplied.
D)a decrease in the quantity supplied.

Question 71

Figure 3.2
Refer to Figure 3.2.Which movement represents increase in the number of firms in the market?

A)A to B
B)B to A
C)S₁ to S₂
D)S₂ to S₁

Question 72

Figure 3.2
Refer to Figure 3.2.An increase in price of inputs would be represented by a movement from:

A)A to B.
B)B to A.
C)S₁ to S₂.
D)S₂ to S₁.

Question 73

Draw a demand curve and label it D₁.On the graph, illustrate an increase in demand and a decrease in demand, and label the curves D₂ and D₃, respectively.Starting on demand curve D₁, explain the shift that would result from each of the following events:
a.an increase in income and the good is a normal good
b.an increase in income and the good is an inferior good
c.a decrease in the price of a substitute good
d.a decrease in the price of a complementary good
e.an increase in the taste for the good
f.a decrease in population
g.an increase in the expected future price of the good
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Question 74

What is the difference between an 'increase in supply' and an 'increase in quantity supplied'?

A)There is no difference between the two terms; they both refer to a shift of the supply curve.
B)There is no difference between the two terms; they both refer to a movement along a given supply curve.
C)An 'increase in supply' means the supply curve has shifted to the right while an 'increase in quantity supplied' means at any given price supply has increased.
D)An 'increase in supply' means the supply curve has shifted to the right while an 'increase in quantity supplied' refers to a movement along a given supply curve in response to an increase in price.

Question 75

If consumers believe the price of MP3 players will decrease in the future, this will cause the demand for MP3 players to increase now.

Question 76

Which of the following would cause a decrease in the supply of milk?

A)An increase in the price of cookies (assuming that milk and cookies are complements)
B)A decrease in the price of milk
C)An increase the price of a product that producers sell instead of milk
D)An increase in the number of firms that produce milk

Question 77

What is the ceteris paribus condition?
_____________________________________________________________________________________________
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Question 78

If, in the market for oranges, the supply has increased then________.

A)the supply curve for oranges has shifted to the right.
B)the supply curve for oranges has shifted to the left.
C)there has been a movement upwards along the supply curve for oranges.
D)there has been a movement downwards along the supply curve for oranges.

Question 79

List the five variables that will shift the demand curve?
_____________________________________________________________________________________________
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Question 80

A change in the quantity of a good supplied occurs when________.

A)supplier expectations about future prices change.
B)the price of the good changes.
C)the cost of producing the good changes.
D)prices of substitutes in production change.