Macroeconomics Chapter 3
A change in demand comes about only because of a change in the ________________ conditions of demand. This change in demand is a shift in the demand curve to the left or to the right.
ceteris paribus
c. If the price of coffee rises, and as a result the demand for sugar falls, this implies that these two goods are
complements
An increase in the number of pizza producers or a decrease in the cost of mozzarella cheese used to make pizza will shift the
supply curve for pizza outward.
If the price of flash memory chips used in manufacturing smartphones decreases, what will happen in the market for smartphones? This would cause smartphone _____________ to _____________, causing the equilibrium price to _____________ and the equilibrium quantity to ___________.
supply; increase; decrease; increase
A decrease in the cost of production.
No
Consumer incomes decrease (DVDs are a normal good).
No
The number of sellers increases.
No
c. The supply of soft drinks decreases.
T
What if the increase in demand were larger than the increase in supply?
The equilibrium price and quantity increase.
Which of the following will cause an outward (rightward) shift in supply?
A technological improvement.
Suppose that paper is necessary to produce books. If the price of paper rises, the supply curve of
books shifts to the left
If the number of firms in an industry decreases, the supply curve will shift to the right.
False
Assume the cost of aluminum used by soft-drink companies increases. Which of the following correctly describes the resulting effects in the market for canned soft drinks? I. The demand for soft drinks decreases. II. The quantity of soft drinks demanded decreases. III. The supply of soft drinks decreases. IV. The quantity of soft drinks supplied decreases.
II and III.
d. If the present rental rate of one-bedroom apartments is $600 per month, through what mechanism will the rental rate adjust to the equilibrium rental rate of $800?
Since the price is below equilibrium, the shortage of apartments will cause the quantity supplied to rise and the quantity demanded to fall.
b. The quantity of soft drinks demanded decreases.
T
An increase in the number of buyers.
Yes
The price of movie downloads rise.
Yes
Which of the following will cause the demand curve to shift?
a change in consumer income
There is normally _____________ relationship between price and quantity of a good supplied, other things held constant.
a direct
According to the law of supply, as the price of the good decreases, it causes
a movement downward along the supply curve.
The law of supply states that there is ____________ relationship between the price and ______________.
a positive; the quantity supplied
The relative price of any commodity is its price in terms of
another commodity.
c. There is an increase in the number of consumers of portable power banks. Equilibrium quantity would ______________. Equilibrium price would ____________.
increase in demand. increase; increase
b. If the price of tennis racquets falls, and as a result the demand for tennis balls ____________, this implies that these two goods are complements.
increases
According to the law of demand, the quantity demanded of any commodity is ________ related to its price, other things being equal.
inversely
According to the example in the book, medical research has shown that grapefruit juice can adversely affect the effectiveness of certain medications. This is likely to affect the demand for grapefruit because
people will buy less grapefruit because their tastes and preferences have changed.
The decrease in the price of tablet devices that are complements to portable power banks causes a ______________ shift in the demand for portable power banks, from Upper D 1 to Upper D 2. At the price of $4 per portable power bank, the quantity of portable power banks demanded ____________.
rightward; rises
For substitutes, a change in the price of a product will cause a change in demand in the ________ direction for the other good. For complements, a change in the price of a product will cause a change in demand in the ________ direction for the other good.
same; opposite
Whenever there is a change in a ceteris paribus condition there will be a change in ________, which is represented by a ________.
supply; shift in the entire supply curve
A demand schedule shows
various quantities of a good or service demanded at various prices.
All of the following pairs of goods are substitutes except
we observe the price of bacon increases and the demand for eggs decreases.
All of the following pairs of goods are complements except
we observe the price of coffee decreases and the demand for tea decreases.
Identify which of the following would generate a decrease in the market demand for e-book readers, which are a normal good. I. An increase in the price of downloadable apps utilized to enhance the e-book reading experience, which are complements. II. An increase in the number of consumers in the market for e-book readers. III. A decrease in the price of tablet devices, which are substitutes. IV. A reduction in the income of consumers of e-book readers.
I, III and IV.
A demand schedule gives a schedule of ________ quantities demanded per time dimension at ________.
alternative; different possible prices
A supply schedule gives a schedule of ________ quantities supplied per time dimension at ________.
alternative; different possible prices
d. Publishers expect that the market price of economics textbooks will increase next month. This will cause a(n)
decrease in supply.
A rightward shift in the supply curve for a good may be caused by any of the following except
an increase in average consumer income
The law of demand posits ____________ relationship between the quantity demanded of a good and its price, other things being equal.
an inverse
Thus, as the price decreases,
the quantity produced by firms decreases.
What is the relative price of a jar of jelly?
0.600
Suppose that the price of a jar of peanut butter is $5 and the price of a jar of jelly is $3. What is the relative price of a jar of peanut butter?
1.667
At equilibrium, there is neither excess quantity supplied nor excess quantity demanded.
True
The price at which quantity demanded equals quantity supplied and at which the demand curve intersects the supply curve is called the market clearing price.
True
If the current price of a good is less than the equilibrium price, there will be
a shortage of the good and its price will increase.
Consider the chewing gum market shown in the graph at right. An increase in the supply of chewing gum will ________ the equilibrium price and _________ the equilibrium quantity.
decrease; increase
The quantity of tickets for a Super Bowl game is fixed at 90,000. At the price per ticket of $1,000, there is excess
demand
If the demand and supply curves increase (shift outward) by identical proportions then
equilibrium price stays the same and quantity rises.
Whenever the price is ______________ the equilibrium price, there is an excess quantity supplied (a surplus).
greater than
A surplus occurs when quantity supplied is ________ than quantity demanded at a price ________ the market clearing price.
greater; above
The market clearing price occurs at the ________________ of the market demand curve and the market supply curve. It is also called the ______________ price, the price from which there is no tendency to change unless there is a change in demand or supply.
intersection; equilibrium
Whenever the price is _______________ the equilibrium price, there is an excess quantity demanded (a shortage).
less than
A shortage occurs when quantity demanded is ________ than quantity supplied at a price ________ the market clearing price.
greater; below
d. The quantity of soft drinks supplied decreases.
F
Which of the following is consistent with the law of demand?
A doubling of the price of salt led to a 5 percent drop in the quantity of salt purchased.
Identify which of the following would generate an increase in the market demand for tablet devices, which are a normal good. I. A decrease in the incomes of consumers of tablet devices. II. An increase in the price of ultrathin computers, which are substitutes. III. An increase in the price of online apps, which are complements. IV. An increase in the number of consumers in the market for tablet devices.
Both II and IV.
Which of the following is an implication of the law of supply?
Producers will offer more units at a higher price and fewer units at a lower price.
b. If the present rental rate of one-bedroom apartments is $1,000 per month, through what mechanism will the rental rate adjust to the equilibrium rental rate of $800?
Since the price is above equilibrium, the surplus of apartments will cause the quantity supplied to fall and the quantity demanded to rise.
Suppose that at first the price of a bag of coffee is $15 and the price of a box of tea is $9. Then, the price of a bag of coffee changes to $30 and the price of a box of tea changes to $21. What has happened the money prices and relative prices of these two goods?
The money price of a bag of coffee and a box of tea have risen and the relative price of a bag of coffee has fallen while relative price of a box of tea has risen.
Based on the table above, which of the following is true?
The money prices of both goods increased, the relative price of hospital rooms increased, and the relative price of hotel suites decreased.
A rise in the demand for a dashboard global positioning minus system device follows a change in the price of automobiles comma which are complements.
The price of the complement decreased.
A fall in the demand for physical books follows a change in the price of e minus books comma which are substitutes.
The price of the substitute decreased.
When there is an inferior good, a decrease in consumer income will result in the
demand curve shifting to the right
a. If the price of bacon rises, and as a result the demand for sausage increases, this implies that these two goods are
substitutes
The ___________ curve normally shows a direct relationship between price and quantity supplied.
supply
Which of the following is consistent with the law of supply?
An increase in the market price of MP 3 players causes an increase in the production of MP 3 players.
What if the increase in demand were smaller than the increase in supply?
Equilibrium price falls and quantity rises.
A change in which of the following will result in a shift of the supply curve?
Cost of inputs used to produce the product, taxes and subsidies and technology and productivity
Assume that the cost of aluminum used by soft-drink companies increases. Indicate which of the following statements describing the resulting effects in the market for soft drinks distributed in aluminum cans are true (T) or false (F). a. The demand for soft drinks decreases.
F
A change in a good's own price leads to a change in supply, which shifts the supply curve.
False
A rise in demand is represented by a leftward shift in the demand curve, and a fall in demand is represented by a rightward shift in the demand curve.
False
Shortages and scarcity are the same thing.
False
We measure the demand schedule in terms of a time dimension and in _____________-quality units.
constant
A decrease in the number of pizza producers or an increase in the cost of mozzarella cheese used to make pizza will shift the
supply curve for pizza inward.
Consider the market for laptop computers. Click on the graph to the right to determine how the following event will impact this market. Do this by illustrating the event on the graph and then assess its impact on the equilibrium quantity and the market price. Event: The price of memory chips used in laptop computers declines.
The supply increases, causing the equilibrium quantity to rise and the market price to fall.
A change in a good's own price leads to a change in quantity demanded for any given demand curve.
True
A market demand curve is derived by summing (at each price) the individual quantities demanded by all buyers in the market.
True
A market supply curve is derived by summing the individual producers' supply curves.
True
Which of the following good is an inferior good?
When consumer income increases, the demand for eggs decreases.
A leftward shift in the supply curve for a good may be caused by any of the following except
a consumer expectation of an increase in their future income
Consider in the graph to the right the demand curve for bananas. The movement from point A to point B could have been caused by
a decrease in the price of bananas.
All of the following will decrease the supply of airline flights except
a technological change that makes airplanes safer and more fuel-efficient.
According to the same example in the book, medical research has shown that grapefruit juice can reduce the effectiveness of certain medications. However, there is also evidence that grapefruit consumption can lower cholesterol in young people. The net effect on demand from these two findings
cannot be determined because they have opposite effects on demand.
Indicate whether the following events would cause an "increase or a decrease in demand LOADING..." or an "increase or a decrease in the quantity demanded" for cable-based Internet access service, which is a normal good. a. Firms providing wireless (an alternative to cable) Internet access services reduce their prices. This will cause a(n)
decrease in demand.
c. There is a decrease in the incomes earned by consumers of cable-based Internet access services. This will cause a(n)
decrease in demand.
In the market for portable power banks, indicate whether the following events would cause an "increase or a decrease in demand" or an "increase or a decrease in the quantity demanded." a. There is an increase in the price of carry cases for portable power banks. Equilibrium quantity would _______________. Equilibrium price would ______________.
decrease in demand. decrease; decrease
e. Consumers of portable power banks anticipate that the price of this good will decline in the future. Equilibrium quantity would ______________. Equilibrium price would ____________.
decrease in demand. decrease; decrease
d. There is a decrease in the market demand for smartphones. This will cause a(n) Equilibrium quantity would _____________. Equilibrium price would ____________.
decrease in quantity supplied. decrease; decrease
Consider the market for economics textbooks. Explain whether the following events would cause an increase or a decrease in supply or an increase or a decrease in the quantity supplied. a. The market price of paper increases. This will cause a(n)
decrease in supply.
b. The price of machinery used to produce smartphones increases. This will cause a(n) Equilibrium quantity would ____________. Equilibrium price would _____________.
decrease in supply. decrease; increase
The law of _____________ applies when other things, such as income and the prices of all other goods and services, are held constant.
demand
Demand curves are drawn with determinants other than the price of the good held constant. These other determinants, called ceteris paribus conditions, are (1) _______________, (2) _______________, (3) _______________, (4) _______________, and (5) ________________. If any one of these determinants changes, the demand curve will shift to the right or to the left.
income; tastes and preferences; prices of related goods; expectations about future prices and incomes; the number of potential buyers in the market at any given price
d. Consumers' tastes shift away from using wireless Internet access in favor of cable-based Internet access services.
increase in demand.
b. There is a decrease in the price of devices used to charge portable power banks. Equilibrium quantity would ______________. Equilibrium price would ____________.
increase in demand. increase; increase
d. A booming economy increases the income of the typical buyer of portable power banks (this is a normal good). Equilibrium quantity would ______________. Equilibrium price would ____________.
increase in demand. increase; increase
b. Firms providing cable-based Internet access services reduce their prices. This will cause a(n)
increase in quantity demanded.
b. The market price of economics textbooks increases. This will cause a(n)
increase in quantity supplied.
c. The number of publishers of economics textbooks increases. This will cause a(n)
increase in supply.
Consider the market for smartphones. Explain whether the following events would cause an increase or a decrease in supply or an increase or a decrease in the quantity supplied. a. The price of touch screens used in smartphones declines. This will cause a(n) Equilibrium quantity would _____________. Equilibrium price would ___________.
increase in supply. increase; decrease
c. The number of manufacturers of smartphones increases. This will cause a(n) Equilibrium quantity would ___________. Equilibrium price would ____________.
increase in supply. increase; decrease
The ________________ curve is derived by summing the quantity demanded by individuals at each price.
market demand
The law of supply states that there is a _____________ relationship between the price and __________________.
price; the quantity supplied
Thus, as the price increases, the
quantity supplied by firms increases.
Other things remaining equal, the law of demand says that higher prices will lead to a
smaller quantity demanded and lower prices to a larger quantity demanded.
Whenever there is a change in a ceteris paribus condition there will be a change in ________, which is represented by a ________.
demand; shift in the entire demand curve
According to the law of supply, the quantity supplied of any commodity is ________ related to its price, other things being equal.
directly
According to the text, firms encounter rising costs when they attempt to produce more in the same time period. As a consequence, they must be offered a higher price to be willing to incur these higher costs. The resulting relationship between price and quantity supplied is
direct (or positive) and is called the law of supply.
d. If the price of automobiles ________, and as a result the demand for motorbikes falls, this implies that these two goods are substitutes.
falls
The supply curve is drawn with other things held constant. If these ceteris paribus conditions of supply change, the supply curve will shift. The major ceteris paribus conditions are (1) ____________, (2) ______________, (3) _______________, (4) _____________, and (5) _____________.
input prices; technology and productivity; taxes and subsidies; expectations of future relative prices; the number of firms in the industry
The ____________ curve is obtained by horizontally adding individual supply curves in the market.
market supply
If the price changes, we _______________a curve - there is a change in quantity demanded or supplied. If some other determinant changes, we _____________ a curve - there is a change in demand or supply.
move along; shift
A change in the quantity demanded comes about when there is a change in the price of the good (other things held constant). Such a change in quantity demanded involves a _____________ a given demand curve.
movement along
The law of supply then implies that a _______________ the supply curve occurs due to a change in market price.
movement along
According to the law of supply, as the price of the good increases, it causes a
movement upward along the supply curve.
