Chapter 2 Supply and Demand

These factors will tend to cause a shift in supply for a good: (multiple answers) a. an increase in the price of the good b. increases in the number of sellers c. a decrease in the price of the good d. improvements in technology that make a good less expensive to produce

B, D

Which of the following statements are true regarding changes to market equilibrium? (multiple answers) a. a decrease in supply will tend to lead to a decrease in the market price for a good b. an increase in demand will tend to lead to a decline in the price for a good c. a decrease in demand will tend to lead to an decrease in the market price for a good. d. an increase in supply will tend to lead to a drop in the market price for a good.

C, D

Along a supply curve, all of the following factors are assumed to be held constant other than a. the number of sellers that are active in the market place b. the technology that is used to produce that product c. the costs of inputs to the production of that product d. the price of the product being offered for sale

D

Which of the following correctly describes the concept of equilibrium in the market for a good? a. a point on a supply or demand curve from which there is a tendency to move. b. any two points on demand and supply curves for a good where the price is the same c. any two points on demand and supply curves for a good where the quantity is the same d. the price and quantity where the supply curve intersects with the demand curve.

D

Which of the following will tend to cause only a change in the quantity demanded and not a shift of the demand curve? a. a change in preferences b. a change in income c. a change in the price of complements d. a change in the price of the product

D. a change in the price of the product

True or false: Ceteris paribus, an increase in the number of farmers growing corn will tend to increase the demand for corn.

False

a cost that already has occurred and cannot be recovered.

Sunk cost

Select the statements that are correct regarding the price of elasticity of demand. (multiple answers) a. is calculated as the percentage change in the quantity demanded divided by the percentage change in price b. is most frequently calculated to be a negative number c. is most frequently calculated as a positive number d. is calculated as the percentage change in price divided by the percentage change in quantity demanded

a, b

Which of the following typically causes a demand curve to shift as opposed to a movement along the demand curve? (multiple answers) a. changes in tastes b. changes in income c. changes in prices of substitutes d. changes in price

a, b, c

Identify which of the following factors will tend to cause a shift of the supply curve for a good. a. an improvement in technology which makes it cheaper to produce b. a decrease in the price of the product c. an increase in the price of the product d. an increase in the supply of an unrelated good

a. an improvement in technology which makes it cheaper to produce

Which of the following statements best summarizes the relationship between external factors and a demand curve? a. price and the amount of a product buyers wish to buy will vary along a demand curve b. external factors are assumed to be held constant along a demand curve c. external factors are unrelated to a demand curve in any way. d. changes in external factors, other than those on the axes of a graph, will typically cause movements along a demand curve.

b

equals the percentage change in the quantity demanded of the product for each 1 percent increase in the price of the other product

cross-price elasticity of demand

The percentage change in the quantity demanded divided by the percentage change in income is...

income elasticity of demand

demand is ___________ _____________ when the demand curve is vertical so that the elasticity of demand is zero

perfect inelastic

demand is __________ ___________ when the demand curve is horizontal so that the elasticity of demand equals negative infinity

perfectly elastic

The price elasticity of demand is calculated by ______________.

taking the percentage change in quantity demanded and dividing it by the percentage change in price.

equals the percentage change in quantity demanded for each 1 percent increase in income

Income elasticity of demand

the percentage change in quantity supplied for each 1 percent increase in the price

Price elasticity of supply

Which of the following factors can affect the demand for corn? (Multiple answers) a. The tastes and preferences of individuals b. The usefulness of corn to feed livestock c. The quantity of farmers growing corn d. The level of income for the economy as a whole

a, b, d

Select the statements that are correct below. (multiple answers) a. Income elasticity of demand is positive for a normal good b. income elasticity of demand is negative for a normal good c. income elasticity of demand relates the changes in market prices for a good to the changes in income d. income elasticity of demand relates the changes in quantity demanded to changes in income

a, d