Chapter 4: Supply and Demand

Demand Curve

A __________ is the graphic representation of the relationship between price and quantity demanded.

Movement Along a Demand Curve

A __________ is the graphical representation of the effect of a change in price on the quantity demanded.

Movement Along a Supply Curve

A __________ is the graphical representation of the effect of a change in price on the quantity supplied.

Shift in Supply

A __________ is the graphical representation of the effect of a change in the factor other than price on supply.

Supply Curve

A __________ is the graphical representation of the relationship between price and quantity supplied.

Market Demand Curve

A __________ is the horizontal sum of all individual demand curves.

Shift in Demand

A __________is the graphical representation of the effect of anything other than price on demand.

B. a shift in demand.

A change in a factor other than price that affects demand leads to a: A. a change in quantity demanded. B. a shift in demand.

A., B., and D.

A change in which of the following can shift the demand curve for a good? A. Tastes and preferences of the consumers B. Expectations of the consumers in the future price of the good C. The cost of input to production D. Taxes paid by and subsidies paid to by the consumer

A. horizontal sum of all individual supply curves.

A market supply curve is the: A. horizontal sum of all individual supply curves. B. vertical sum of some individual supply curves. C. the maximum supply curve. D. vertical sum of all individual supply curves.

B. the quantity supplied will rise.

According to the law of supply, when the price of candy rises A. input prices must have fallen. B. the quantity supplied will rise. C. the quantity supplied will fall. D. the input prices must have risen.

A. an excess supply of 10 units.

At a price of $10, there is: A. an excess supply of 10 units. B. an excess supply of 20 units. C. equilibrium. D. an excess demand of 10 units.

A. demand of 4 units.

At a price of $12, there is an excess: A. demand of 4 units. B. supply of 8 units. C. supply of 4 units. D. demand of 8 units.

D. supply of 4 units.

At a price of $24, there is an excess: A. supply of 8 units. B. demand of 2 units. C. demand of 4 units. D. supply of 4 units.

B. 20 units.

At a price of $6, the quantity demanded will be: A. 15 units. B. 20 units. C. 25 units. D. 10 units.

C. quantity demanded exceeds quantity supplied.

Excess demand is the amount by which: A. demand exceeds supply. B. price exceeds its equilibrium. C. quantity demanded exceeds quantity supplied. D. price is less than its equilibrium.

D. $18, 6 units

For the given graph, equilibrium price and quantity is: A. $12, 4 units B. $12, 8 units C. $24, 8 units D. $18, 6 units

A. a point along the supply curve.

Graphically, quantity supplied refers to: A. a point along the supply curve. B. the income effect. C. the entire supply curve. D. the substitution effect.

C. quantity of shoes demanded will fall.

If the price of shoes rises, the A. the demand for shoes will fall. B. quantity of shoes demanded will rise. C. quantity of shoes demanded will fall. D. the demand for shoes will rise.

Excess Demand

If there is __________ (a shortage), quantity demanded is greater than quantity supplied, and there are more consumers who want the good than there are suppliers selling the good.

Excess Supply

If there is __________ (a surplus), quantity supplied is greater than quantity demanded, and some suppliers won't be able to sell all their goods.

Shift Factors of Demand

Important __________ that affect how much will be demanded include: 1. Society's income 2. The prices of other goods 3. Tastes 4. Expectations 5. Taxes and subsidies

C. a decrease in quantity demanded.

In the graph shown above, movement from point A to point B represents: A. a decrease in demand. B. an increase in demand. C. a decrease in quantity demanded. D. an increase in quantity demanded.

B. A less B

In the graph, which of the following represents excess supply? A. A less C B. A less B C. B less E D. B less A

B. $3

In the table above, there is excess demand at price: A. $5 B. $3 C. $4

C. U.S. labor market

In which of the following markets will the fallacy of composition be most important to consider? A. Market watches in Massachusetts B. Labor market in New York C. U.S. labor market D. U.S. market for watches

C., D., and E.

Supply shifts with a change in: A. the price of the good. B. consumer income. C. expectation of sellers. D. production technology. E. the price of inputs for the good.

D. A fall in quantity supplied and a rise in quantity demanded.

Suppose a market has an excess supply and price starts to fall. What is likely to happen to quantity demanded and supplied? A. A rise in quantity supplied and a fall in quantity demanded. B. A fall in both quantity supplied and quantity demanded. C. A rise in both quantity supplied and quantity demanded. D. A fall in quantity supplied and a rise in quantity demanded.

Fallacy of Composition

The __________ is the false assumption that what is true for a part will also be true for the whole.

Market Supply Curve

The __________ is the horizontal sum of all individual supply curves.

Law of Demand

The __________ states that the quantity of a good demanded is inversely related to the good's price.

Law of Supply

The __________ states that the quantity of a good supplied is directly related to the good's price.

B. P2

The given graph shows the demand for a good increasing from D0 to D1. The new equilibrium price of the good is: A. P3 B. P2 C. P1 D. P4

B. Q1

The given graph shows the supply of a good decreasing from S0 to S1. The new equilibrium quantity of the good is: A. Q3 B. Q1 C. Q2

B. 24

The given tables shows the individual demand for pens for individuals A, B, and C. At a price of $2.00, the quantity demanded by the market is: A. 11 B. 24 C. 19 D. 30

D. consumers will substitute a relatively cheaper good.

The law of demand is based on the observation that if the price of a good rises, A. the government will step in to lower prices. B. suppliers will be able to substitute inputs to production. C. the price of inputs to production will rise. D. consumers will substitute a relatively cheaper good.

B. and C.

The law of demand states that the quantity demanded A. rises as price rises. B. rises as price falls. C. falls as price rises. D. falls as price falls.

More, Not Supplying, and Risen

The law of supply is based on the fact that a firm will want to supply __________ (less/more) of a good when its price rises because the opportunity cost of __________ (not supplying/supplying) the good has (fallen/risen).

A. A

The line that best depicts the demand curve is: A. A B. B C. neither A nor B. It is horizontal. D. neither A nor B. It is vertical.

C. a decrease in quantity supplied.

The movement in this graph from point A to B shows: A. an increase in quantity demanded. B. a decrease in supply. C. a decrease in quantity supplied. D. an increase in supply.

B. improvement of technology.

The movement of the supply curve shown could be due to an: A. increase in the price of inputs. B. improvement of technology. C. increase in the demand for the good. D. imposition of a tax on the supplier of the good.

D. a tax levied on the producer of the good.

The movement of the supply curve shown could be due to: A. an improvement in technology. B. a subsidy to the suppliers of the good. C. a decrease in the prices of the good. D. a tax levied on the producer of the good.

C. an increase in the consumers' income, assuming the good is a normal good.

The shift of the demand curve from D0 to D1 could be due to: A. an increase in taxes. B. a decrease in the price of a substitute good. C. an increase in the consumers' income, assuming the good is a normal good. D. an increase in the price of a complimentary good.

A. 24

The table shows the individual supply of pens for individuals. A, B, and C. AT a price of $2.00, the quantity supplied by the market is: A. 24 B. 33 C. 18 D. 10

Market Demand Curve

To create a __________, add quantities demanded of all individuals in the market at every price.

False

True or false: A change in the price of a good causes a shift in the demand curve.

True

True or false: Excess supply is the amount by which quantity supplied exceeds quantity demanded.

C. number of workers seeking jobs exceeds the number of jobs available in that sector.

When the wage rate paid to labor in a particular sector is below equilibrium, the A. supply of labor must decrease in that sector. B. number of jobs available exceeds the number of workers seeking jobs in that sector. C. number of workers seeking jobs exceeds the number of jobs available in that sector. D. demand for labor must increase in that sector.

Rise

When there is excess demand for a good, prices tend to __________ (fall/rise/stay the same).

C. in equilibrium.

When upward pressure on price is exactly offset by the downward pressure on price, a market is said to be: A. in surplus. B. indeterminate. C. in equilibrium. D. competitive.

A. and B.

Which of the following can shift the demand curve for a good? A. The income of the consumer falls. B. The price of another good falls. C. Production techniques improve. D. The price of the good falls.

B. and C.

Which phenomena underlie the law of demand for the market? A. At higher prices, individual revenue falls. B. At lower prices, new demanders enter the market. C. At higher prices, existing demanders buy less. D. At lower prices, individual income rises.

Downward, Rises, and Fall

__________ (downward/upward) sloping because as price __________ (falls/rises), quantity demanded tends to __________ (fall/rise).

Equilibrium

__________ is a concept in which opposing dynamic forces cancel each other out.

Equilibrium Quantity

__________ is the amount bought and sold at the equilibrium price.

Equilibrium Price

__________ is the price toward which the invisible hand drives the market.

Supply

__________ refers to a schedule of quantities a seller is willing to sell per unit of time at various prices, other things constant.

Demand

__________ refers to a schedule of quantities of a good that will be bought per unit of time at various prices, other things constant.

Quantity Supplied

__________ refers to a specific amount that will be supplied at a specific price.

Quantity Demanded

__________ refers to specific amount that will be demanded per unit of time at a specific prices, other things constant.

Shift Factors of Supply

__________ that affect how much will be supplied include: 1. Price inputs 2. Technology 3. Expectations 4. Taxes and subsidies