Econ Supply and Demand test

Inferior goods

income goes up- demand for inferior goods goes down income goes down- demand for inferior goods goes up

Normal goods

income goes up- demand for normal goods goes up income goes down- demand for normal goods goes down

Elastic

% of change in price < % of change in quantity demanded

Unitary Elastic

% of change in price = % of change in quantity demanded

Inelastic

% of change in price > % of change in quantity demanded

What makes a DEMAND curve shift?

-Price of related goods -Income -Number of people (population) -Taste and preference -Expectations (ex. expect that you will have a job for many years to come)

What makes a SUPPLY curve shift?

-Resource prices -Technology -Taxes -Subsidies -Quotas -Number of sellers -Future price -Weather

T or F: If the cost of making bicycles falls, the price goes down, causing the demand curve to shift to the right.

False

Diminishing marginal utility

Decreasing satisfaction or usefulness as additional units of a product are acquired

T or F: If the demand curve shifts to the right, then we move up and to the right along our supply curve.

True

Negative utility

a lack of pleasure or satisfaction from consuming a product or service or taking an action; the opposite of utility (sometimes you must pay someone to use this product)

Suppose that both the price of gasoline and the amount of gasoline sold decline. Which of the following would account for this? a. a shift left of the demand curve, but no change in the supply curve b. a shift right of the demand curve, but no change in the supply curve c. a shift left of the supply curve, but no change in the demand curve d. a shift right of the supply curve, but no change in the demand curve

a. a shift left of the demand curve, but no change in the supply curve

If shoe-repair services are an inferior good, then: a. if people's incomes go up, they spend less for shoe repair b. if the price of shoe repair falls, people want less of it c. people will only want shoe repair services if they are deceived by advertising d. people do not base their decisions to buy shoe repairs on costs-benefit reasoning

a. if people's incomes go up, they spend less for shoe repair

An increase in the price of chicken feed shifts the supply curve for eggs to the left and moves buyers along the demand curve. In the jargon of economics, we have had a change in: a. supply and a change in quantity demanded b. supply and change in demand c. quantity supplied and a change in quantity demanded d. quantity supplied and a change in demand

a. supply and a change in quantity demanded

What happens in the market for airline travel when the price of traveling by rail decreases? a. the demand curve shifts left b. the demand curve shifts right c. the supply curve shifts left d. the supply curve shifts right e. we move along the supply curve

a. the demand curve shifts left

All the following shift the demand curve for automobiles to the right except: a. the local factory gives a big raise to its employees b. a brand new automobile dealership opens in town c. the price of gasoline falls d. none of the above

b. a brand new automobile dealership opens in town

Which of the following provides an example of complementary goods? a. Pepsi and Coca-Cola b. french fries and ketchup c. milk and orange juice d. beef and pork

b. french fries and ketchup

Suppose that there has been a decline in the price of pork. What effect will this have on the market for beef? a. it will decrease demand and decrease supply b. it will decrease demand and decrease quantity supplied c. it will decrease quantity demanded and decrease supply d. it will decrease quantity demanded and decrease quantity supplied

b. it will decrease demand and decrease quantity supplied

When college students leave town for the summer, the demand for meals at the local restaurants declines. This results in: a. a decrease in equilibrium price and an increase in quantity b. an increase in equilibrium price and quantity c. a decrease in equilibrium price and quantity d. an increase in equilibrium price, and a decrease in quantity e. none of the above

c. a decrease in equilibrium price and quantity

Which of the following will move the demand curve for pork to the right? a. a reduction in the cost of corn that is used to feed pigs b. a reduction in the price of pork c. an increase in the price of beef d. all of the above

c. an increase in the price of beef

The Supply Curve is upward-sloping because: a. as the price increases, so do costs b. as the price increases, consumers demand less c. as the price increases, suppliers can earn higher levels of profit or justify higher marginal costs to produce more d. none of the above

c. as the price increases, suppliers can earn higher levels of profit or justify higher marginal costs to produce more

If the cost of computer components falls, then a. the demand curve for computers shifts to the right b. the demand curve for computers shifts to the left c. the supply curve for computers shifts to the right d. the supply curve for computers shifts to the left

c. the supply curve for computers shifts to the right

If a sin tax is placed on sales of alcohol: a. the demand curve shifts to the left b. the demand curve shifts to the right c. the supply curve shifts to the left d. the supply curve shifts to the right

c. the supply curve shifts to the left

Part of the reason that Michael Jordan earns millions of dollars each year while school teachers may earn $30,000 is because: a. the supply of superstar basketball players is very low, while the supply of competent teachers is much larger b. demand for Michael Jordan's talents is very high since he can generate so much revenue for a firm c. consumers enjoy basketball to the point that they are willing to spend lots of money and time attending games and watching commercials d. all of the above

d. all of the above

If both the demand curve and supply curve move to the left, we can predict: a. price will fall, but we cannot predict quantity b. price will rise, but we cannot predict quantity c. quantity will rise, but we cannot predict price d. quantity will fall, but we cannot predict price

d. quantity will fall, but we cannot predict price

The price at which there is neither surplus nor shortage is called: a. the adjustment price b. the equal price c. the fair price d. the market-clearing price

d. the market-clearing price

Number of substitutes available

more available substitutes tend to make demand for a good elastic; fewer available substitutes tend to make demand for a good inelastic

Factors that determine Elasticity of Demand

number of substitutes available, luxuries versus necessities, the percentage of income spend on the good, and time

The percentage of income spent on the good

the demand for goods that take a large percentage of income tends to be elastic; the demand for goods that take a relatively small percentage of income tends to be inelastic

Luxuries versus necessities

the demand for luxuries tends to be elastic; the demand for necessities tends to be inelastic

Time

the less time you have to respond to a price change in a good, the more likely it is that your demand for that good is going to be inelastic