Chapter 3

List two examples of substitute products.

1. butter & margarine 2. androids & iPhones

List the 5 non-price Ceteris Paribus conditions that affect the demand curve.

1. consumer's income 2. tastes & preferences 3. price of related goods 4. expectations regarding future prices & incomes 5. market size (# of potential buyers)

List the 5 non-price Ceteris Paribus conditions that affect the supply curve.

1. cost of inputs 2. technology & productivity 3. taxes & subsidies 4. price expectations 5. # of firms in industry

If the demand for two products go in the same direction are the two products substitutes or compliments?

compliments

If the cost of cotton (an input cost) used in making blue jeans decreases, which of the following will occur? a. there will be a movement along an unchanged supply curve for jeans b. the supply curve for jeans will shift rightward c. the supply curve for jeans will shift leftward d. there will be a rightward shift in the supply curve jeans, followed by a movement along the supply curve

correct answer: b

If the price of tennis racquets falls, and as a result the demand for tennis balls increases, this implies that these two goods are a. substitutes? b. compliments?

correct answer: b

If Androids & iPhones are substitute products, what impact would an increase in the price of Androids have on iPhone demand?

demand for iPhones would increase

If income increases, will the demand curve for an inferior goos shift left or right?

left

If income increases, will the demand curve for a normal good shift to the left or right?

right

If the demand for iPhones goes in the opposite direction, are the two products substitutes or compliments?

substitutes

What are two types of related goods?

substitutes & compliments

If the price of bacon rises, and as a result the demand for sausage increases, does this imply that the two goods are a. substitutes? b. compliments?

correct answer: a

The Law of Demand implies that the demand curve a. has a negative slope. b. has a positive slope. c. shifts to the right when the price of a good increases. d. shifts to the left when the price of a good decreases.

correct answer: a

When the price increases, what impact does that have on the quantity demanded? a. quantity demanded decreases. b. quantity demanded increases. c. demand curve shifts to the right. d. demand curve shifts to the left.

correct answer: a

List two examples of compliment products.

1. peanut butter & jelly 2. iPhones & iPhone cases

Which of the following causes a movement along a supply curve? a. a change in resource costs b. a change in technology c. a change in the price d. all of the above

correct answer: c

The Law of Demand states a. if prices, income, & the price of other goods increase, demand will increase. b. there is a positive relationship between price & the quantity demanded. c. as price increases, quantity demanded increases, all other things equal. d. as price increases, quantity demanded decreases, all other things equal.

correct answer: d

Which of the following will shift today's supply curve to the right? a. input costs decrease. b. sales taxes increase. c. a change in the price of a related good. d. a decrease in the number of sellers.

correct answer: a

An improvement in technology in the production of computers would a. increase the demand for computers. b. increase the supply for computers. c. decrease the demand for computers. d. decrease the supply of computers.

correct answer: b

An increase in demand for a normal good resulting from an increase in personal income is represented by a. shift of the demand curve to the left. b. shift of the demand curve to the right. c. movement down the demand curve. d. movement up the demand curve.

correct answer: b

The Law of Supply states that a. the quantity supplied of a good will always equal the quantity of the good demanded. b. there is a positive relationship between the price of any good and the quantity supplied, holding other factors constant. c. at the equilibrium price, there is always some excess supply in the market. d. supply creates its own demand.

correct answer: b

When the price of a good increases, the result can be shown by a. a shift of the demand curve to the right. b. a shift of the demand curve to the left. c. a movement down the demand curve. d. a movement up the demand curve.

correct answer: d

Which change causes a movement along the demand curve? a. tests & preferences b. number of buyers c. buyers' beliefs about the future d. price changes

correct answer: d

If the price of Androids increased, what impact would that have on the demand for Androids?

demand would decrease