Econ 251 (PNW) Chapter 3 Learnsmart
T/F: In the supply and demand model, quantity demanded is illustrated on the vertical axis, while price is illustrated on the horizontal axis.
False
A decrease in demand while holding supply constant results in _______ in both equilibrium price and quantity.
a decline
Change in the number of buyers is a determinant of market _____.
demand
Consumer expectation is a determinant of _________.
demand
A shortage results from an excess of quantity __________
demanded
With a price ceiling, quantity ________ will exceed quantity _______, resulting in a persistent shortage of product.
demanded; supplied
According to the law of supply, price and quantity supplied have a(n) _____ relationship
direct (positive)
When a price ceiling is established, the new price and quantity are now at:
disequilibrium
________ output is where quantity demanded and quantity supplied are equal in a competitive market.
equilibrium
An inverse relationship between two variables is a(n) _____ relationship
negative
A change in demand occurs due to a change in a consumer's state of mind about purchasing a product that is based on something other than the ______ of the product.
price
If producers expect lower future prices for their goods or services, they will _______ now, illustrated as a shift in the supply curve to the _______.
increase their supply; right
A change in quantity demanded is caused by an increase or decrease in the _________ of the product under consideration and nothing else.
price
A change in quantity supplied is caused by an increase or decrease in the ________ of the product under consideration and nothing else.
price
On a supply curve, ________ is labeled on the vertical axis
price
Which of the following summarize determinants of supply and their net effect on the supply curve?
-a change in resource prices will increase or decrease supply and cause the supply curve to shift to the right or left, respectively -a change in the number of sellers will increase or decrease supply and cause the supply curve to shift to the right and left, respectively
Which of the following statements are true?
-a decrease in consumers' income would decrease the demand for a normal good -an increase in the price of a normal good would decrease the quantity demanded of the good
The demand for a normal good is likely to increase due to ________
-a decrease in the price of complementary goods -an increase in the number of buyers
Which of the following are examples of a market?
-a local gas station -the New York Stock Exchange -a pay-to-play online gaming site -eBay
Which of the following are reasons for inverse relationship between price and quantity demanded?
-a lower price increases the purchasing power of a buyer's income, enabling a buyer to purchase more of a product. -people ordinarily buy more of a product a low price than at a high price. -consumption is subject to diminishing marginal utility. -a higher price makes it more likely the consumer will substitute another good.
From an economic perspective, which of the following are true of a market?
-a market can be local, national, or international -a market is a virtual and/or physical institution or space
Which of the following factors increase the demand for any good or service?
-a rise in consumer income -an increase in the price of a substitute good -an increase in the number of buyers
Which of the following would result in a change in supply?
-an increase in the excise tax on cigarettes. -an increase or decrease in wages. -an increase in the number of shoe stores at the local mall
Which of the following scenarios describe the appropriate effects on equilibrium price and quantity due to a decrease in supply while holding everything else constant?
-an oil spill causes several fisherman to leave the shrimp business and the equilibrium price of shrimp increases while quantity decreases. -a fishing tax is placed on all shrimp and the equilibrium price of shrimp increase while quantity decreases.
Which of the following correctly state that effects on equilibrium price and quantity due to an increases in demand, while holding everything else constant?
-consumers expect the price of shrimp to increase in the future, therefore the equilibrium price and quantity increase now -the price of Coke increases, therefore the equilibrium price and quantity of Pepsi increase -3-D TVs become popular, therefore the equilibrium price and quantity increase.
Which of the following are determinants of demand?
-consumers' tastes (preferences) -the number of buyers in the market -consumers' incomes -the prices of related goods -consumer expectations
if the government of a country subsidizes the production of a good, it:
-lowers the cost of production -increase supply
Choose all of the following that will cause a change in supply, not quantity supplied.
-number of sellers -producer expectations -technology
In which of the following situations do governments intervene to prevent prices from rising above or falling below their equilibrium levels?
-prices are too low for firms -prices are too high for consumers
Government-set prices cause:
-shortages -surpluses -negative side effects -distortion in resource allocation
Which of the following are the characteristics of a competitive market?
-standardized products -large number of buyers and sellers
Which of the following types of goods affect the demand for another product due to a change in their price?
-substitute goods -complimentary goods
Which of the following illustrates the relationship between a good and its complement?
-when the price of tuition decreases, the demand for textbooks increases. -when the price of lettuce increases, the demand for salad dressing decreases.
Which of the following are determinants of supply?
1. Resource prices 2. Technology 3. Taxes and subsidies 4. Prices of other goods 5. producer expectations 6. The number of sellers in the market
Identify those statements that correctly state the effects on equilibrium price and quantity as a result of changes in supply and/or demand?
1. When the supply and the demand for corn rises proportionally, the change in equilibrium price is indeterminate, but quantity will rise. 2. When the supply of DVD players falls while holding demand constant, the equilibrium price will rise and quantity will fall. 3. When the demand for health care rises while holding supply constant, the equilibrium price and quantity of health care will rise.
An increase in equilibrium price and indeterminate effect on equilibrium quantity is a result of which of the following?
A decrease in supply and a proportional and simultaneous increase in demand
An increase in the equilibrium price of a good and an indeterminate change in the equilibrium quantity is the result of:
An increase in demand and decrease in supply.
Which of the following shows the effects on equilibrium price and quantity due to an increase in supply and a simultaneous decrease in demand?
Equilibrium price falls and the change in quantity in indeterminate.
T/F: Goods that are used together with other goods are called substitutes.
False
Which of the following best explains why economists "sound the alarm" when politicians advocate government-controlled prices such as price ceilings or price floors?
Government-controlled prices cause shortages or surpluses, distort resource allocation, and potential environmental damage
In which of the following situations will quantity supplied exceed the quantity demanded?
In the imposition of a price floor
Which of the following are substitutes?
Pepsi and Coca-Cola
T&F: Equilibrium price is the price where the intentions of buyers and sellers match.
True
_____ while holding demand constant, results in an increase in the equilibrium price of the good, but a decrease in the equilibrium quantity of the good
a decrease in the supply of a good (leftward shift)
The inverse relationship between price and quantity demanded can be shown graphically by _________ sloping curve.
a downward
Which of the following refers to a change in quantity supplied?
a movement from one point to another on a fixed curve
The price actually paid for a good is not reflected in the demand because the demand is merely:
a statement of buyers' intentions regarding the buying of the good
Which of the following refers to a particular apportionment or mix of goods and services most highly valued by society?
allocative efficiency
Other things equal, the fundamental characteristic of supply is:
as the price falls, the quantity supplied falls
A price _________ is the maximum legal price a seller may charge for a product or service
ceiling
A ____________ good is one that is used together with another good.
complementary
The determinants of demand, other things equal, are assumed to be ___________ when a demand curve is drawn or computed.
constant
The concept of demand can be summarized by a schedule or curve showing the quantity of a product that would be:
consumed at various possible prices.
If a decrease in demand is greater than a decrease in supply, equilibrium price will _______.
decrease
An unfavorable change in consumer tastes and preferences for a product will _______ demand, illustrated as a shift of demand curve to the _______
decrease; left
Suppose the market for a good is in equilibrium. Assume that there is a decline in the supply of the good and an increase in the demand for the good. If the decline in supply is larger than the increase in demand, the equilibrium quantity will __________
fall
T/F: The inverse relationship between price and quantity demanded is called the law of supply
false
A price _______ is a minimum price fixed by the government, generally imposed above the equilibrium price.
floor
Producer expectations refer to firms' expectations of ____ for a good or service that they produce.
future prices
Which of the following is a complement to hamburger patties?
hamburger buns
Which of the following is a determinant of demand?
income
An increase in demand while holding supply constant results in a(n) __________ in both equilibrium price and quantity.
increase
When the price of Coke rises, the demand of Pepsi will likely:
increase
Which of the following does not exemplify an improvement in technology affecting supply?
increased subsidies to farmers for producing more corn
A normal good is an item for which demand ______ when income rises and ________ when income falls.
increases; decreases
Greater resource prices _______ the costs of production, thereby, ______ the incentive for firms to produce the good at each price.
increases; reducing
The vast majority of goods that are not related to one another are called _____ goods?
independent
Products that have decreased demand when consumer incomes rise and increased demand when consumer incomes fall are called _______ goods.
inferior
Other things equal, when price falls, the quantity demanded rises. This represents the ______ relationship between the price and quantity demanded
inverse
The law of demand describes a(n) _____ relationship between the price of a good or service and the quantity demanded of that good or service
inverse
A demand curve shows the:
inverse relationship between price and quantity demanded for a product.
As firms leave an industry supply decreases, causing the supply curve to shift to the ___.
left
If costs of production rise, the producer has an incentive to produce _____ output.
less
The added cost of producing one more unit of output is called ____ cost.
marginal
The demand by a consumer for a good or service essentially reflects the ____ benefit of the food or service, based on the utility received.
marginal
________ benefit is the additional utility gained from consuming one more unit of a good or service.
marginal
Diminishing _______ states that, in any specific time period, buyers will derive less satisfaction from each additional unit of the product consumed.
marginal utility
Other things equal, firms will produce and offer for sale ______ of their product at a high price than at a low price
more
The interaction between buyers and sellers, which determines equilibrium ______ and equilibrium ___________, is illustrated by the intersection of the demand and supply curves
price and quantity
The supply curve illustrate the relationship between:
price and quantity supplied
As a result of a simultaneous and proportional increase in supply and decrease in demand, __________
price falls and the change in equilibrium quantity is indeterminate
Competition among corn producers forces them to use the best technology and right mix of productive resources; otherwise their costs will be too high relative to the market price and they will be unprofitable. This is best described as _________ efficiency.
productive efficiency
The interaction between buyers and sellers determines equilibrium price and equilibrium ____.
quantity
The prices of the ________ used in the production process help determine the costs of production incurred by firms
resources
When a factor other than price affects consumption of a good or service, the demand curve can shift ______ or _______.
right; left
If an increase in supply is larger than a decrease in demand, the equilibrium will ____________
rise
If the increase in demand is greater than the decrease in supply, the equilibrium quantity will _________.
rise
The law of supply states that as price _____, the quantity supplied rises and as price _____, the quantity supplied falls
rises; falls
A demand __ organizes the relationship between price and quantity in a tabular format, whereas the demand __ is a graphical representation of this relationship
schedule; curve
A ____ the demand curve represents a change in demand while a ____ demand curve represents a change in the quantity demanded.
shift of; movement along
A change in supply is represented by a ________ the supply curve while a change in quantity supplied is represented by a ______ the supply curve
shift of; movement along
_____________ suggests that at a lower price buyers have the incentive to substitute what is now a less expensive product for other products that are now relatively more expensive.
substitution effect
A surplus is also known as an excess of ________.
supply
An increase in _________, while holding demand constant, results in a decrease in equilibrium price, but an increase in equilibrium quantity
supply
Market ____ is a schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each possible price during a specific price.
supply
The number of sellers or competitors in a market is a determinant or shifter of the ___ curve.
supply
The prices of substitute goods that are used in production is a determinant of ________
supply
________ refers to the production of a product, whereas demand refers to the consumption of a product.
supply
the prices of substitute goods that are used in production is a determinant of _____
supply
Equilibrium price and quantity in a market changes when there is a change in _________
supply & demand
T/F: The law of demand can be supported by the income effect.
true
A necessary condition for the demand of a good is that a consumer must be:
willing and able to buy the good
