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

Question 1

The ________ effect of a price change refers to the impact of a change in the price of a good on a consumer's purchasing power.

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

Answer 1

A

Question 2

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

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

Answer 2

B

Question 3

Table 3-1

Refer to Table 3-1.The table above shows the demand schedules for Kona coffee of two individuals (Luke and Ravi)and the rest of the market.If the price of Kona coffee rises from $4 to $5,the market quantity demanded would

A)decrease by 35 lb.
B)increase by 115 lb.
C)increase by 35 lb.
D)decrease by 115 lb.

Answer 3

A

Question 4

The market for smartphones has become very competitive.The increase in competition in this market is an example of how the market responds to

A)decreases in the price of desktop computers (a substitute for the product).
B)increases in income.
C)changes in population.
D)changes in consumer tastes.

Question 5

If,in response to a decrease in the price of coffee,the quantity demanded of coffee 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 coffee.

Question 6

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

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

Question 7

If you are considering buying either an Apple iPhone or a Samsung Galaxy,and you choose the Samsung only because the price is lower,then you consider

A)the iPhone and the Galaxy to be complements.
B)the iPhone and the Galaxy to be substitutes.
C)the iPhone to be a normal good and the Galaxy to be an inferior good.
D)the iPhone to be an inferior good and Galaxy to be a normal good.

Question 8

Table 3-1

Refer to Table 3-1.The table above shows the demand schedules for Kona coffee of two individuals (Luke and Ravi)and the rest of the market.At a price of $4,the quantity demanded in the market would be

A)40 lb.
B)70 lb.
C)110 lb.
D)150 lb.

Question 9

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

A)consumer income.
B)consumer tastes and preferences.
C)the price of the good.
D)the quality of the good.

Question 10

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

A)the price of the product
B)expected future prices
C)the number of firms in the market
D)the quantity supplied of the product

Question 11

The phrase "demand has increased" 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 12

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

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

Question 13

An ________ is represented by a rightward shift of the demand curve while an ________ is represented by a movement along a given demand curve.

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

Question 14

The substitution effect of a price change refers to

A)the change in quantity demanded that results from a change in price making a good more or less expensive relative to other goods that are substitutes.
B)the shift of a demand curve when the price of a substitute good changes.
C)the movement along the demand curve due to a change in purchasing power brought about by the price change.
D)the shift in the demand curve due to a change in purchasing power brought about by the price change.

Question 15

Which of the following will not shift the demand curve for a good?

A)an increase in population
B)an increase in the price of the good
C)a decrease in the price of a substitute good
D)an increase in consumer incomes

Question 16

Table 3-1

Refer to Table 3-1.The table above shows the demand schedules for Kona coffee of two individuals (Luke and Ravi)and the rest of the market.At a price of $6,the quantity demanded in the market would be

A)36 lb.
B)68 lb.
C)89 lb.
D)123 lb.

Question 17

A ________ demand curve for shampoo would be caused by a change in the price of shampoo.

A)rightward shift of the
B)leftward shift of the
C)movement along the
D)positively sloped

Question 18

Table 3-1

Refer to Table 3-1.The table above shows the demand schedules for Kona coffee of two individuals (Luke and Ravi)and the rest of the market.If the price of Kona coffee falls from $6 to $4,the market quantity demanded would

A)decrease by 89 lb.
B)increase by 26 lb.
C)increase by 61 lb.
D)increase by 110 lb.

Question 19

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

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

Question 20

A demand curve shows the relationship between

A)the price of a product and the quantity of the product demanded.
B)the amount of a product sellers are willing to sell at a particular price and the amount consumers are willing to buy at that price.
C)the quantity that consumers are willing and able to buy and the quantity that sellers are willing and able to offer.
D)the price of a produce and the demand for the product.

Question 21

How has the growing popularity of factory outlet stores affected the market for clothing at retail department stores?

A)the demand curve for clothing at retail department stores shifts to the right.
B)the demand curve for clothing at retail department stores shifts to the left.
C)the supply curve for clothing at retail department stores shifts to the right.
D)the supply curve for clothing at retail department stores shifts to the left.

Question 22

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

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

Question 23

If the price of propane-fueled gas grills was to decrease,then

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

Question 24

Figure 3-1
Refer to Figure 3-1.An increase in the price of a substitute 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 a decrease in income leads to in a decrease in the demand for ice cream,then ice cream is

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

Question 26

Figure 3-1
Refer to Figure 3-1.An increase 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 27

Figure 3-1
Refer to Figure 3-1.If the product represented is a normal 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 28

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

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

Question 29

Figure 3-1
Refer to Figure 3-1.A decrease 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 30

If the price of smartphones was to increase,then

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

Question 31

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

A)an increase in the demand for pork rinds.
B)an increase in the demand for corn chips,a substitute for pork rinds.
C)an increase in the quantity of pork rinds demanded.
D)a decrease in the quantity of pork rinds demanded.

Question 32

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

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

Question 33

The income effect of a price change results in a

A)shift of the demand curve when income changes.
B)movement along the demand curve due to a change in relative prices.
C)shift of the demand curve due to a change in purchasing power brought about by the price change.
D)movement along the demand curve due to a change in purchasing power brought about by the price change.

Question 34

Figure 3-1
Refer to Figure 3-1.An increase 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 35

Suppose that when the price of hamburgers increases,the Ruiz family increases their purchases of hot dogs.To the Ruiz family,

A)hamburgers and hot dogs are complements.
B)hamburgers and hot dogs are inferior goods.
C)hamburgers and hot dogs are normal goods.
D)hamburgers and hot dogs are substitutes.

Question 36

According to a recent study,"Stricter college alcohol policies,such as raising the price of alcohol,or banning alcohol on campus,decrease the number of students who use marijuana." On the basis of this information,how would you describe alcohol and marijuana?

A)The two goods are substitutes in consumption.
B)There is no relationship between the two goods.
C)The two goods are complements in consumption.
D)They are both luxury goods.

Question 37

Figure 3-1
Refer to Figure 3-1.If the product represented is an inferior 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 38

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

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

Question 39

Figure 3-1
Refer to Figure 3-1.A decrease 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 40

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

A)an increase in the demand for beef jerky.
B)an increase in the demand for hot sauce,a complement for beef jerky.
C)an increase in the quantity of beef jerky demanded.
D)a decrease in the quantity of beef jerky demanded.

Question 41

How does the decreasing use of DVD players affect the market for prerecorded DVDs?

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

Question 42

Buyers scrambled to secure stocks of Australian wool following a forecast of an 11 percent decline in wool production.What happens in the Australian wool market as a result of this announcement?

A)The demand curve for Australian wool shifts to the left in anticipation of higher prices in the future.
B)The demand curve for Australian wool shifts to the right in anticipation of higher prices in the future.
C)The quantity of Australian wool demanded increases in anticipation of higher prices in the future.
D)The quantity of Australian wool demanded decreases in anticipation of lower quantities in the future.

Question 43

Apple's decision in 2002 to focus on developing a smartphone rather than a tablet computer exemplifies the

A)refusal of firms to invest in more than one project where unlimited resources are involved.
B)refusal of firms to invest in more than one project where limited resources are involved.
C)trade-off that firms face due to unlimited resources.
D)trade-off that firms face due to limited resources.

Question 44

Table 3-2

Refer to Table 3-2.The table above shows the demand schedules for cashews of two individuals (Jordy and Amy)and the rest of the market.At a price of $10,the quantity demanded in the market would be

A)2 lbs.
B)48 lbs.
C)50 lbs
D)52 lbs.

Question 45

Factory incentives on cell phones have encouraged consumers to upgrade their phones.How does this affect the market for bluetooth headsets?

A)The quantity of bluetooth headsets demanded increases.
B)The quantity of bluetooth headsets demanded decreases.
C)The demand for bluetooth headsets increases.
D)The demand for bluetooth headsets decreases.

Question 46

The demand for soft drinks in the United States has been ________ while the global demand has been ________.

A)increasing; increasing
B)increasing; decreasing
C)decreasing; increasing
D)decreasing; decreasing

Question 47

If tablet computers are considered substitutes for e-readers,the increase in the price of tablet computers would,all else equal,

A)increase the demand for e-readers.
B)decrease the demand for e-readers.
C)increase the quantity of e-readers demanded.
D)decrease the quantity of e-readers demanded.

Question 48

Suppose that when the price of ice cream increases,Liza decreases her purchase of hot fudge.To Liza,

A)ice cream and hot fudge are complements.
B)ice cream and hot fudge and substitutes.
C)ice cream and hot fudge are normal goods.
D)ice cream is a normal good and hot fudge is an inferior good.

Question 49

Suppose that when the price of oranges decreases,the Sarita decreases her purchases of peaches.To Sarita,

A)oranges and peaches are complements.
B)oranges and peaches are inferior goods.
C)oranges and peaches are normal goods.
D)oranges and peaches are substitutes.

Question 50

Technological advancements have led to lower prices and an increase in the sale of color laser printers.How does this affect the market for laser printer ink cartridges?

A)The demand curve for laser printer ink cartridges shifts to the right.
B)The demand curve for laser printer ink cartridges shifts to the left.
C)The quantity of laser printer ink cartridges demanded increases.
D)The quantity of laser printer ink cartridges demanded decreases.

Question 51

In January,buyers of gold expect that the price of gold will fall in February.What happens in the gold market in January,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 52

Several studies have shown promising links between green tea consumption and cancer prevention.How does this affect the market for green tea?

A)The quantity of green tea demanded increases because of a change in tastes in favor of green tea.
B)The green tea demand curve shifts to the right because of a change in tastes in favor of green tea.
C)The green tea demand curve shifts to the left because this new information will increase the price of green tea.
D)The quantity of green tea demanded decreases because this new information will increase the price of green tea.

Question 53

Suppose that when the price of pickles decreases,Teddy increases his purchase of ketchup.To Teddy,

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

Question 54

How does the increasing use of digital 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

If the price of gasoline increases,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 56

Table 3-2

Refer to Table 3-2.The table above shows the demand schedules for cashews of two individuals (Jordy and Amy)and the rest of the market.At a price of $6,the quantity demanded in the market would be

A)87 lbs.
B)95 lbs.
C)103 lbs
D)215 lbs.

Question 57

If the price of train tickets decreases,what will be the impact in the market for bus travel ?

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

Question 58

If tablet computers are considered substitutes for e-readers,the decline in the price of e-readers would,all else equal,

A)increase the demand for tablet computers.
B)decrease the demand for tablet computers.
C)increase the quantity of tablet computers demanded.
D)decrease the quantity of tablet computers demanded.

Question 59

Technological advancements have led to lower prices and an increase in the sale of color laser printers.How does this affect the market for traditional inkjet printers?

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

Question 60

In September,buyers of silver expect that the price of silver will rise in October.What happens in the silver market in September,holding all else constant?

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

Question 61

For each of the following pairs of products state which are complements,which are substitutes,and which are unrelated.
a.Swim fins and scuba tanks
b.Coca Cola and Volkswagens
c.Printers and ink cartridges
d.Ice and ice chests
e.Heineken and Corona

Question 62

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 substitute product.

Question 63

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

Question 64

Explain the Law of Demand.

Question 65

Table 3-2

Refer to Table 3-2.The table above shows the demand schedules for cashews of two individuals (Jordy and Amy)and the rest of the market.If the price of cashews rises from $4 to $6,the market quantity demanded would

A)decrease by 33 lbs.
B)increase by 39 lbs.
C)increase by 33 lbs.
D)decrease by 39 lbs.

Question 66

If the price of peaches,a substitute for plums,increases the demand for plums will decrease.

Question 67

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

Question 68

Peanut butter and jelly are complements.If the price of peanut butter increases,the demand for jelly will increase.

Question 69

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

Question 70

Explain the difference between substitutes and complements.

Question 71

Cole was discussing the market for cocoa beans with his friend John Schmidt.Cole said,"Ever since Venezuela announced that its cocoa harvest was its lowest ever in fifteen years,the price of cocoa beans has been rising and rising and people are buying more and more.I think the demand for cocoa beans must be upward sloping." Is Cole right? Briefly explain why or why not.

Question 72

An increase in population results in an increase in demand.

Question 73

When the price of a good rises,consumers buy a smaller quantity because of the ________ effect and the ________ effect.

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

Question 74

If the price of prime rib falls,the income effect due to the price change will cause

A)an increase in the demand for prime rib.
B)an increase in the demand for flank steak,a substitute for prime rib.
C)an increase in the quantity demanded of prime rib.
D)an increase in the quantity supplied of prime rib.

Question 75

Table 3-2

Refer to Table 3-2.The table above shows the demand schedules for cashews of two individuals (Jordy and Amy)and the rest of the market.If the price of cashews falls from $4 to $2,the market quantity demanded would

A)decrease by 28 lbs.
B)increase by 36 lbs.
C)increase by 28 lbs.
D)decrease by 36 lbs.

Question 76

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

Question 77

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

Question 78

What is the difference between a demand schedule and a demand curve?

Question 79

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

Question 80

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