Chapter 3 Homework Questions

Which of the following increases the demand for an normal good?

The price of the good is expected to increase in the future.

When people's incomes increase, the demand for a good increases. The good is called

a normal good.

In the market for magazines, the "income effect" means that

an increase in the price of magazines will reduce the total purchasing power of magazine readers, making them able to afford fewer magazines.

The opportunity cost of a good is the same as its

relative price.

Which of the following shifts the supply curve rightward?

a decrease in the price of a factor of production used to produce the good

Which of the following shifts the demand curve for oranges?

a decrease in the price of a pound of bananas, a substitute in consumption for oranges

The price of a cereal rises. As a result, people have cereal for breakfast on fewer days and eat eggs instead. This behavior is an example of

a decrease in the quantity demanded of cereal because of the substitution effect.

If the quantity supplied exceeds the quantity demanded, then there is

a surplus and the price is above the equilibrium price.

If consumers' incomes increase and the demand for bus rides decreases

bus rides are an inferior good.

The quantity demanded of a good or service is the amount that

consumers plan to buy during a given time period at a given price.

A recession occurs and people's incomes decrease. Knowing that an iPad is a normal good, you predict that the demand for an iPad

decreases.

If income increases or the price of a complement falls, the

demand curve for a normal good shifts rightward.

Demands differ from wants because

demands reflect a decision about which wants to satisfy and a plan to buy the good, while wants are unlimited and involve no specific plan to acquire the good.

If a decrease in the price of gasoline increases the demand for large cars, then

gasoline and large cars are complements in consumption.

If the money price of wheat increases and no other prices change, the

opportunity cost of wheat rises.

In a supply and demand figure, the equilibrium price and quantity are found at the

point where quantity supplied equals quantity demanded.

The opportunity cost of good A in terms of good B is equal to the

ratio of the money price of good A to the money price of good B.

If the price of a candy bar is $1 and the price of a fast food meal is $5, then the

relative price of a fast food meal is 5 candy bars.

By itself, an increase in the number of suppliers in a market results in a

rightward shift in the supply curve.

The law of demand states that, other things remaining the same, the higher the price of a good, the

smaller is the quantity of the good demanded.

The quantity supplied of a good is

the amount that the producers are planning to sell at a particular price during a given time period.

If the price of chicken falls, then in the market for beef,

the demand curve for beef shifts leftward.

Each point on the demand curve reflects

the highest price consumers are willing and able to pay for that particular unit of a good.

The "law of supply" refers to the fact that, all other things remaining the same, when the price of a good rises

there is a movement up along the supply curve to a larger quantity supplied.

There is a technological advance in the production of ice cream. As a result, the supply curve of ice cream shifts ____________ and _________________.

rightward; the equilibrium price falls while the equilibrium quantity increases

Suppose that people find out that eating more fish improves their health, leading them to increase their demand for fish. As a result, the equilibrium price of fish ____________ and the equilibrium quantity _______________.

rises; increases

A bakery can produce either cakes or cookies. If the price of cookies rises, then

the supply curve of cake shifts leftward.

The price of a bag of corn chips is $3, and the price of a bottle of soda is $1. What is the relative price of a bag of corn chips?

3 bottles of soda

A price below the equilibrium price results in

a shortage

If the demand for hamburgers decreases, the equilibrium price

falls and the equilibrium quantity decreases.