Ch. 3 Market Demand and Supply

39. An increase in the demand for a product means that the:

demand curve shifts to the right.

63. Sugar and honey are viewed as substitutes for each other in many cooking applications. If the price of sugar rises, we would expect the:

demand for honey to increase.

84. As shown in Exhibit 3-5, the price and quantity supplied by sellers of Tucker's Cola have a(n) ____ relationship.

direct.

5. The law of demand is illustrated by a demand curve that is:

downward-sloping.

141. A surplus means a(n):

excess supply of the product at the current price.

142. Assume that the equilibrium price for a good is $5. If the market price is $10, a:

surplus causes the price to decline toward $5.

66. Complementary goods are goods:

that are consumed jointly.

155. If the current price of a good is the same as that found at the intersection of the market demand and supply curves, then:

the market is in equilibrium.

169. In Exhibit 3-11, in Panel A the movement from point A to point C describes a(n):

decrease in both price and quantity.

52. Ceteris paribus, which of the following would cause a decrease in the demand for HD TVs, a normal good?

decrease in consumers' income.

170. In Exhibit 3-11, in Panel B the movement from point A to point C describes a(n):

decrease in demand and increase in supply, where the increase in supply is relatively bigger.

19. We can find the market demand for pears by:

adding the individual demand curves for pears.

88. We can find the market supply for phones by:

adding the individual supply curves for phones.

90. According to the law of supply, when will lower corn prices decrease the quantity supplied of corn?

always

36. An increase in the demand for a good means that:

consumers are willing to purchase more of the good at each possible price.

44. Which of the following is most likely to shift the demand curve for electricity to the left?

consumers becoming more energy conscious.

46. An increase in demand:

could be caused by an increase in the price of a substitute good.

43. Suppose all of the major computer manufacturers announced that beginning next month there would be major price reductions on their computers. This would cause the current demand for computers to:

decrease

168. In Exhibit 3-11, in Panel A the movement from point A to point B describes a(n):

decrease in demand and a decrease in the quantity supplied.

101. A leftward shift of a supply curve is called a(n):

decrease in supply.

108. If the United Auto Workers union can obtain a substantial wage increase for auto workers, there will be a(n):

decrease in the supply of automobiles, which is a shift to the left of the supply curve.

149. A shortage of product means a(n):

excess demand of the product.

164. In Exhibit 3-8, if the price of video games was currently $45, there would be an ____________ of ______________ video games in this market.

excess demand; 100

102. Seller A has an upward-sloping supply curve and is willing to supply 400 units of a commodity at a price of $5 per unit. Seller A is now willing to supply 500 units at a price of $5 per unit. Evidently, seller A has experienced a(n):

increase in supply.

117. An improvement in a firm's technology that reduces its production costs will result in a(n):

increase in supply.

140. A surplus of wheat:

is impossible if the price of wheat is below equilibrium.

59. Assuming that bus travel is an inferior good, an increase in consumer income, other things being equal, will cause a(n):

leftward shift in the demand curve for bus travel.

171. In the market shown in Exhibit 3-15, the equilibrium price and quantity of good X are:

$1.00, 200.

87. Exhibit 3-5 shows the supply schedule for Tucker's Cola. Suppose there are four additional suppliers of cola in the market. When the price per gallon of cola is $1.50, the first supplier is willing to sell 10 million gallons, the second supplier is willing to sell 2 million gallons, the third supplier is willing to sell 5 million gallons, and the fourth supplier is willing to sell 0 gallons. The market quantity supplied of cola when the price is $1.50 is

20 million gallons.

106. With an upward-sloping supply curve, which of the following is true?

A decrease in price results in a decrease in quantity supplied.

111. Which of the following events would increase the supply of tomatoes?

A decrease in the cost of fertilizers for the tomato plants.

109. Which of the following would increase the supply of laptop computers?

A technological improvement that lowers the cost of producing laptop computers.

154. The most important characteristic of the equilibrium price is that it:

clears the market.

133. In Exhibit 3-4, which of the following could have caused the shift in the supply curve from S1 to S2?

Decrease in wage rates.

115. Farmers can choose to produce eggs or milk. If there is an increase in the price of milk then what will be the effect in the egg market?

Egg supply will decrease.

134. Which of the following is most likely to increase the supply of corn?

Farmers that grow soybeans can also grow corn, and the price of soybeans drops by 75 percent.

119. Which of the following could cause the supply of carrots to decrease?

Fertilizer costs increase.

129. Which of the following would decrease the supply of airline travel?

Higher fuel costs.

23. At a price of $5, Sam buys 10 units of a product; when the price increases to $6, Sam buys 8 units. Martha says Sam's demand has decreased. Is Martha correct?

No, Martha is incorrect. Sam's quantity demanded has decreased, and his demand has not changed.

137. Assume Qs represents the quantity supplied at a given price and Qd represents the quantity demanded at the same given price. Which of the following market conditions produce a downward movement of the price?

Qs = 1,000, Qd = 750.

91. Which of the following is true for the law of supply?

Sellers increase the quantity of a good supplied as price increases.

114. Farmers can produce wheat and/or rice. What will happen in the wheat market if there is an increase in the price of rice?

Wheat supply will decrease.

162. Exhibit 3-8 presents supply and demand data for the video game market. If the price of video games was currently $70, there would be an ____________ of ______________ video games in this market.

excess supply; 400

163. In Exhibit 3-8, at any market price of video games above $50, a(n) ______________ would result, causing price to __________.

excess supply; fall

138. If there is a surplus in the oil market, then the price of oil will:

fall.

120. The most plausible reason why changes in the price of cotton can cause shifts in the supply curve for tobacco is:

firms can switch from growing tobacco to cotton and vice versa.

123. A reduction in production costs will not result in which of the following?

greater willingness and ability of consumers to demand a larger quantity at any given price.

124. A shift occurs in the supply curve for salt when:

improvements are made in the production process.

104. In reference to Exhibit 3-5, assume the price of Tucker's Cola is $1.00 per gallon. If the price were to rise to $3.00 per gallon, and all other factors, such as taxes, etc. remained constant, the result would be a(n):

increase in quantity supplied.

103. In Exhibit 3-4, a shift in the supply curve from S1 to S2 represents a(n):

increase in supply.

126. To finance medical care, the federal government raises the tax per pack paid by sellers of cigarettes. Other things being equal, the price of cigarettes rises because of a(n):

leftward shift of the supply curve for cigarettes.

135. When there is a surplus of a product in a market the:

price must be above the equilibrium price.

146. When there is a shortage of a product in a market the:

price must be below the equilibrium price.

128. "Because of unseasonable cold weather, much of the peach crop has been destroyed." This statement indicates that the:

quantity of peaches that will be available at any given price has decreased.

113. The development of new technology typically:

shifts the supply curve to the right.

86. Exhibit 3-5 shows the supply schedule for Tucker's Cola. If Tucker's Cola and Refresh Cola are the only two suppliers in the cola market and Refresh Cola is willing to sell 5 million gallons when the price is $3.00, 4 million gallons when the price is $2.50, 3 million gallons when the price is $2.00, 2 million gallons when the price is $1.50, 1 million gallons when the price is $1.00, and 0 gallons when the price is $0.50 or less,

the market quantity supplied of cola will be 7 million gallons when the price is $2.00.

148. Tickets to the Indiana-Purdue basketball game are usually sold out in advance of game day. This suggests:

the price is set below the equilibrium level.

65. Demand for a good will always rise when:

the price of a complementary good falls.

28. A movement along the demand curve for automobiles is caused by a change in:

the price of automobiles.

156. All of the following apply to the description of a market in equilibrium except:

the price of the good is falling.

112. A change in supply cannot be caused by a change in:

the price of the good itself.

89. The "ceteris paribus" clause in the law of supply allows which of the following factors to change?

the price of the good supplied

147. The price of a good will rise when:

there is a shortage of the good.

151. In Exhibit 3-16, assume that the market price of chairs is $5 each. This price is: ​

​not an equilibrium price, since there is an excess demand at a price of $5.

150. In Exhibit 3-16, if the market price of chairs is initially $15, a movement toward equilibrium would require:

​the price to fall below $15, the quantity supplied to fall, and the quantity demanded to rise.​

15. A demand curve for The Steel Porcupines' concert tickets would show the:

number of tickets that will be purchased at various prices.

45. Which of the following will increase the demand for motorcycles?

A fall in insurance rates for motorcycles.

69. Assume that consumers expect the price of gasoline to rise sharply in the future. Which of the graphs in Exhibit 3-3 depicts this effect?

Graph A.

41. Which of the graphs in Exhibit 3-3 depicts the effect of a decrease in the price of pizza on the demand curve for pizza?

Graph B

40. Which of the graphs in Exhibit 3-3 depicts the effect of a decrease in the price of domestic cars on the demand for foreign cars?

Graph C.

68. Which of the graphs in Exhibit 3-3 depicts the effect of an increase in income on the demand for pork and beans (an inferior good)?

Graph C.

8. The law of demand says that the lower the price charged for a good, ceteris paribus, the:

greater the quantity demanded per period of time.

21. The market demand is the:

horizontal sum of all individual demand curves in a market.

17. A demand curve:

illustrates the negative relationship between price and quantity demanded.

83. A supply curve:

illustrates the positive relationship between price and quantity supplied.

38. A rightward shift of a demand curve is called a(n):

increase in demand.

49. If people expect the price of packaged coffee to rise next week, coffee demand will:

increase now.

70. According to the law of supply:

producers are willing to supply larger amounts of a good as its price increases.

100. An increase in the supply of the product implies:

producers will now charge a lower price for a given quantity of output.

79. The supply schedule shows the specific quantity of a good that suppliers are willing and able to:

provide at different prices.

27. A movement along a demand curve is called a change in:

quantity demanded.

99. An increase in the number of producers will:

increase the market supply, because market supply is the sum of all individual supply curves.

53. For a normal good, an increase in consumer income will cause the market demand for the product to:

increase, which is a shift to the right of the demand curve.

29. Other things being equal, the effect of an increase in the price of Coca-Cola would cause a(n):

upward movement along the demand curve for Coca-Cola.

24. A decrease in quantity demanded is given by a(n):

upward movement to the left along the demand curve.

67. Assume that crackers and soup are complementary goods. Which of the graphs in Exhibit 3-3 depicts the effect of a promotional discount that decreases the price of crackers on the demand for soup?

Graph A.

54. Assuming that travel from New York to Los Angeles is a normal good, a decrease in consumer income, other things being equal, will:

decrease the demand for travel to Los Angeles.

33. A decrease in the price of coffee, other things being equal, causes a(n):

downward movement along the demand curve for coffee.

56. If the demand for a good decreases because consumer income increases, the good is a(n):

inferior good.

12. The negative slope of the demand curve reflects the:

inverse relationship between price and quantity.

1. The law of demand refers to the:

inverse relationship between the price of a good and the quantity of a good that people will buy.

30. A fall in the price of a good causes an increase in its:

quantity demanded.

78. A supply schedule shows the relationship between:

quantity supplied and price.

11. The demand schedule for a good shows:

the specific quantity of the good that people are willing and able to buy at different prices.

85. An increase in the quantity supplied of a good is most often due to:

higher prices.

31. Other things being equal, the effects of an increase in the price of computers would best be represented by which of the following?

A movement up along the demand curve for computers.

51. Which of the following will not shift the demand curve for grapefruit to the right?

A technical development that allows machines to replace the workers who harvest grapefruit.

82. Suppose ABC Corporation is willing to sell 100 shirts when the price is $10 and 200 shirts when the price is $15, but XYZ Inc is willing to sell 500 shirts when the price is $10 and 350 shirts when the price is $15. Which of the following statements about the two companies is correct?

ABC Corporation follows the law of supply, but XYZ Inc does not.

34. Other things being equal, the effects of a decrease in the price of orange juice, is represented by which of the following?

An increase in the quantity demanded for orange juice.

50. Which of the following is true if the price of coffee increases?

Both the demand for coffee and tea will increase.

96. Which of the following will cause a movement along the supply curve?

Changes in the market price of a good, other things held constant.

80. Tasha decides that when homes in her neighborhood are selling for $150,000 she will not sell her home. When average prices rise to $175,000, she decides that she will put her home on the market. This is an example of:

a positively-sloped supply curve.

2. The law of demand indicates that as the price of a good increases:

buyers buy less of it.

13. An increase in the quantity demanded of a good is most often due to:

lower prices.

48. If consumer tastes are changing more in favor of the consumption of a particular good the:

maket demand curve would shift to the right.

22. The horizontal summation of all individual demands at different given prices results in the:

market demand curve.

14. Demand curves are negatively sloped when people buy:

more as the price decreases.

71. According to the law of supply:

more of a good will be offered by suppliers as the price rises.

16. A demand curve shows the relationship between:

price and quantity demanded.

7. The "ceteris paribus" clause in the law of demand allows which of the following factors to change?

price of the good demanded

25. When economists say the quantity demanded of a product has increased, they mean the:

price of the product has fallen, and consequently, consumers are buying more of it.

93. When economists say the quantity supplied of a product has decreased, they mean the:

price of the product has fallen, and consequently, suppliers are producing less of it.

92. When economists say the quantity supplied of a product has increased, they mean the:

price of the product has risen, and consequently, suppliers are producing more of it.

47. When firms advertise their products, they are attempting to:

shift the demand for the product to the right.

55. Assuming that automobiles are normal goods, a rise in consumer income, other things being equal, will cause:

the demand curve for automobiles to shift to the right.

97. When economists say the supply of a product has decreased, they mean that:

the supply curve has shifted to the left.

3. The law of demand states that:

there is a negative relationship between the price of a good and the quantity of the good demanded.

76. The law of supply states that:

there is a positive relationship between the price of a good and the quantity of it offered for sale by suppliers.

10. The law of demand shows that:

there is an inverse relationship between price and quantity demanded.

159. In Exhibit 3-6, which of the following are the equilibrium price and equilibrium quantity in the milk market?

$0.50 per quart and 100 quarts of milk.

165. In Exhibit 3-8, if there is a shortage of video games of 200 units, the current price of video games

$45.

167. In Exhibit 3-8, the equilibrium market price in this video game market would be:

$50

166. In Exhibit 3-8, if there is a surplus of video games of 200 units, the current price of video games must be:

$60.

18. Suppose there are only three people in the economy: Jane, Harry, and Bob. The individual demand for corn for each of these consumers is given in Exhibit 3-1. The total quantity demanded of corn if the market price is $5 is

25.

20. Suppose there are 100 consumers with identical individual demand curves. When the price of a movie ticket is $8, the quantity demanded for each person is 5. When the price is $4, the quantity demanded for each person is 9. Assuming the law of demand holds, which of the following choices is the most likely quantity demanded in the market when the price is $6?

700

32. Which of the following best represents the effects of a decrease in the price of tomato juice, other things being equal?

A downward movement along the demand curve for tomato juice.

35. Suppose the prices of petroleum products, including gasoline and fuel oil, fell sharply. Which of the following would most likely occur as the result of the lower prices of petroleum products?

A reduction in the demand for home insulation products.

125. Which of the following would not cause a shift in the supply curve for a good?

An increase in demand for that good.

110. Which of the following will reduce the supply of motorcycles?

An increase in taxes imposed on motorcycle producers.

158. In Exhibit 3-6, which of the following is true about the milk market?

At price 0.70 there is an excess supply of milk.

37. A baby boom will have what immediate effect on the disposable diaper market?

Demand increases.

6. Which of the following is true for the law of demand?

There is an inverse relationship between the price of a good and the quantity of the good demanded.

42. In Exhibit 3-2, the shift in the demand curve from D1 to D2 could have been caused by which of the following?

Increase in expected future prices.

57. Which of the following will cause the demand curve for a good to shift to the right?

Increase in the price of a substitute good.

95. Which of the following will cause a shift to the left of the supply curve?

Increases in taxes per unit of output.

94. Which of the following will cause a movement upward along a supply curve?

Increases in the market price of a good, other things being equal.

81. Which of the following corresponds to the definition of the supply curve?

It depicts a positive relationship between prices and quantity supplied.

58. Which of the following must be true if good X is a normal good and income increases?

The demand for X will increase, and thus the price and quantity sold and bought will increase.

9. The "other things being equal" clause in the law of demand does allow which of the following factors to change?

The price of the good being demanded.

107. How will an increase in lumber prices influence the home construction market?

The supply of newly constructed homes will decrease.

72. Which of the following states the definition of supply?

There is a positive relationship between the price of a good and the quantity offered for sale by suppliers.

4. According to the law of demand, when will higher corn prices reduce the quantity demanded of corn?

When nonprice determinants, like income and the number of buyers, are unchanged.

61. If a decrease in the price of good Y causes the demand for good Z to decrease, this indicates that:

Y and Z are substitutes.

26. Which of the following is least likely to increase the demand for new tires?

a decrease in the price of tires

131. Which of the following is the least likely to result from an advance in technology?

a leftward shift of the supply curve.

153. When quantity supplied equals quantity demanded, there is:

a market-clearing price (equilibrium price).

105. A technological improvement in producing good A would cause:

a shift to the right of the supply curve for A.

60. Assuming that generic brands are inferior goods, an increase in consumer income, other things being equal, will cause a(n):

leftward shift in the demand curve for generic goods.

118. A decrease in the number of dry cleaners in an area is represented by a(n):

leftward shift in the dry cleaning supply curve.

64. Other things being equal, the effect of a decrease in the price of DVDs on the market for DVD players is a(n):

rightward shift in the demand curve for DVD players.

127. Assuming that soybeans and tobacco can both be grown on the same land, a decrease in the price of tobacco, other things being equal, causes a(n):

rightward shift in the supply curve for soybeans.

116. If Congress decides to reduce the tax per pack paid by sellers of cigarettes, other things being equal, the price of cigarettes will fall. This fall in prices can be attributed a(n):

rightward shift of the supply curve for cigarettes.

130. Assume that oranges and peaches can both be grown on the same type of land, a decrease in the price of peaches, other things being equal, will cause a(n):

rightward shift of the supply curve for oranges.

73. In general, supply curves slope upward because:

rising prices provide producers with a greater profit incentive.

77. Supply curves slope upward because:

rising prides provide producers with the incentives needed to increase the quantity supplied.

161. In Exhibit 3-7, if price happened to currently be $25 in this market, a _______ would result, causing a _______ in price.

shortage; increase

157. The use of a price system eliminates:

shortages and surpluses.

122. A technological improvement in the production of good X causes the:

supply curve for X to shift to the right.

121. There is a technological advance in the production of digital watches. This will cause:

supply to increase.

145. When the price of a good is above its equilibrium price, a:

surplus puts downward pressure on the price.

160. In Exhibit 3-7, if price happened to currently be $75 in this market, a _______ would result, causing a __________ in price.

surplus; decrease

62. Suppose that X and Y are substitute goods. If the price of good X increases, we can expect:

the demand curve for good Y to shift to the right.

74. According to the law of supply, there is a direct relationship between quantity supplied of pickles and:

the price of the pickles.

173. In Exhibit 3-15, if the market price of good X is initially $1.50, a movement toward equilibrium requires:

the price to fall below $1.50, the quantity supplied to fall, and the quantity demanded to rise.

172. In Exhibit 3-15, if the market price of good X is initially $.50, a movement toward equilibrium requires:

the price to rise above $.50, the quantity supplied to rise, and the quantity demanded to fall.

152. If equilibrium is present in a market:

the quantity demanded equals quantity supplied.

98. A decrease in supply means that:

the quantity supplied at every price will decrease.

143. If the current market price is above the equilibrium price, then:

the quantity supplied will exceed the quantity demanded.

136. The price of a good will fall when:

there is a surplus of the good.

144. If the quantity demanded of milk is 55,000 and the quantity supplied of milk is 80,000, then:

there is an excess supply of 25,000 units of milk.

139. The price of a good will fall if:

there is an excess supply of the good.

75. In accordance with the law of supply, both individual and market supply curves are drawn:

upward-sloping.

132. An improvement in a firm's technology that improves productivity results in a(n):

willingness to supply a larger quantity than before at any given price.