econ exam chapter 3

Explain the difference between a change in demand and a change in quantity demanded. Be sure to specify what causes each to change and how they differ when graphed.

A change in demand results from a change in one or more of the determinants of demand:prices of related goods (substitutes and complements), income of buyers, number of buyers, expectations of future price, and preferences of buyers. When demand changes the entire demand curve shifts to the right (an increase in demand) or to the left (a decrease in demand). A change in quantity demanded results from a change in a good's own price and is shown on a graph by a movement along a given demand curve.

Explain the difference between a change in supply and a change in quantity supplied. Be sure to state what causes each to change and how they differ when graphed.

A change in supply results from a change in one or more of the determinants of supply:prices of relevant resources, prices of other goods, technology, number of sellers, expectations of future price, taxes and subsidies, and government restrictions. When supply changes the entire supply curve shifts to the right (an increase in supply) or to the left (a decrease in supply). A change in quantity supplied results from a change in a good's own price and is shown on a graph by a movement along a supply curve.

What is the law of diminishing marginal utility?

Additional units provide less and less additional utility over a short time period.

If price is on the vertical axis and quantity demanded is on the horizontal axis, why is a demand curve downward sloping (left to right)?

Because a demand curve is the graphical representation of the law of demand, which specifies an inverse relationship between price and quantity demanded, ceteris paribus.

what is a consumer's surplus

Consumer Surplus is the difference between the price that consumers pay and the price that they are willing to pay.

Labor is a resource that is necessary to produce many goods. "If the price of labor falls," says the economist, "the prices of goods will soon follow." How does this work?

If the price of labor falls, the supply of goods rises, and the prices of those goods fall.

what is a neutral good

Neutral goods are necessities. Income does not affect the quantity demand for a normal good.

Describe one of the two reasons given in the textbook to help explain why price and quantity demanded are inversely related.

One reason that price and quantity demanded are inversely related is that people substitute lower priced goods for higher priced goods. As the price of one good rises, people will tend to shift away from consuming that good (reducing the quantity demanded), toward one that is relatively lower priced. The second reason that helps to explain this inverse relationship is the law of diminishing marginal utility. The law of diminishing marginal utility states that the marginal utility of equal successive units consumed tends to decline as more units are consumed. Since people tend to receive more marginal utility from the first unit consumed than from the second unit, it makes logical sense that they would be willing to pay more for the first unit than for successive units. In order to encourage the buyer to purchase more units, the seller must lower the price.

Suppose that the average price of refrigerators has fallen over the past few years, yet the refrigerator companies have offered more and more of them for sale. Does this mean that the supply curve for refrigerators is downward sloping?

The reason that refrigerator prices have fallen is likely a result of a change in one of the determinants of supply. For example, a technological improvement in the production of refrigerators may have occurred. This advance in technology would cause the supply curve for refrigerators to shift to the right, lowering equilibrium price and raising the equilibrium quantity. Since one of the determinants of supply has changed, this is not a case of a movement along a supply curve (and thus does not violate the law of supply).

When Hurricane Katrina hit the Gulf Coast of the United States in 2005 it destroyed 5,000,000 acres of timber. Given that lumber is timber that has been sawed or split into planks and boards, explain in terms of supply and/or demand how the hurricane impacted each of the following markets (be sure to note the expected resulting impact on equilibrium price and quantity): a. Domestic lumber b. Imported lumber c. New home construction

The severe weather would be expected to shift the supply curve for domestic lumber to the left, but would not automatically shift the demand curve. This would result in a higher equilibrium price and a lower equilibrium quantity for domestic lumber. Imported lumber is a substitute for US-grown lumber, therefore the demand curve for imported lumber would be expected to shift to the right. The supply curve for imported lumber would not automatically shift. This would result in a higher equilibrium price and a higher equilibrium quantity for imported lumber. An increase in the price of timber would represent an increase in a resource cost for those who are building new homes. Higher resource costs shift the supply curve for new home construction to the left, but the demand curve would not automatically shift. This would result in a higher equilibrium price and a lower equilibrium quantity for new homes.

At a price above the equilibrium price, there is

a surplus

Which of the following is descriptive of the law of diminishing marginal utility? a. The third hamburger consumed provides less utility than the second hamburger consumed. b. The third hamburger is priced higher than the first hamburger. c. As price falls, quantity demanded rises, ceteris paribus. d. The price of a good rises as the costs of producing that good rise. e. none of the above

a. The third hamburger consumed provides less utility than the second hamburger consumed.

The market demand curve for a given product may be downward sloping even if no person in that market has a downward sloping demand curve.

a. True

f computers and software are complements, then a. a fall in the price of computers will increase the demand for software and, ceteris paribus, the price of software will rise. b. a rise in the price of computers will decrease the demand for software and, ceteris paribus, the price of software will rise. c. a fall in the price of computers will decrease the demand for software and, ceteris paribus, the price of software will fall. d. a rise in the price of software will increase the demand for computers and, ceteris paribus, the price of computers will rise. e. a fall in the price of software will decrease the demand for computers and, ceteris paribus, the price of computers will fall.

a. a fall in the price of computers will increase the demand for software and, ceteris paribus, the price of software will rise.

One reason that helps to explain the law of demand is the law of a. diminishing marginal utility. b. diminishing marginal returns. c. increasing opportunity costs. d. supply.

a. diminishing marginal utility.

A market is said to be in disequilibrium if a. it exhibits either a surplus or a shortage. b. the number of units that individuals are willing to buy exceeds the number of units they can afford. c. it is a market for an inferior good. d. none of the above

a. it exhibits either a surplus or a shortage.

On a supply-and-demand diagram, quantity demanded equals quantity supplied a. only at the single equilibrium price. b. at every price at or above the equilibrium price. c. at every price at or below the equilibrium price. d. at every price.

a. only at the single equilibrium price.

. Oil producers expect that oil prices next year will be lower than oil prices this year. As a result, oil producers are most likely to a. place more oil on the market this year, thus shifting the present supply curve of oil rightward. b. hold some oil off the market this year, thus shifting the present supply curve of oil leftward. c. place more oil on the market this year, thus increasing the quantity supplied of oil at lower but not higher prices. d. hold some oil off the market this year, thus decreasing the quantity supplied of oil at lower but not higher prices.

a. place more oil on the market this year, thus shifting the present supply curve of oil rightward.

If the demand curve for a good shifts leftward, a. quantity demanded is less at each price. b. quantity demanded remains constant at each price. c. quantity demanded is greater at each price. d. demand is greater at each price.

a. quantity demanded is less at each price.

Suppose that for a given good demand increases and supply decreases at the same time. If demand increases by a lesser amount than supply decreases, then equilibrium price __________ and equilibrium quantity __________ for that good. a. rises; falls b. falls; falls c. rises; rises d. falls; rises

a. rises; falls

At a price for which the quantity supplied exceeds the quantity demanded, a __________ is experienced, which pushes the price __________ toward its equilibrium value. a. surplus; downward b. surplus; upward c. shortage; downward d. shortage; upward

a. surplus; downward

A "decrease in demand" means that a. the demand curve has shifted to the left. b. price has declined and consumers want to purchase more of the good. c. the demand curve has shifted to the right. d. the price of the good can be expected to decline, assuming supply stays constant.

a. the demand curve has shifted to the left.

Resource X is necessary to the production of good Y. If the price of resource X rises, a. the supply curve of Y shifts leftward. b. the supply curve of Y shifts rightward. c. the supply curve of Y is unaffected. d. there is a movement down the supply curve of Y. e. there is a movement up the supply curve of Y.

a. the supply curve of Y shifts leftward.

If S1 is the relevant supply curve, a decrease in the price of a resource that is necessary for the production of good X causes a. the supply of good X to shift from S1 to S2 b. the supply of good X to shift from S1 to S3. c. a movement along S1 perhaps from point A to point B. d. a movement along S1 perhaps from point A to point C. e. no change in the supply of good X.

a. the supply of good X to shift from S1 to S2

What is the law of supply?

an increase in price results in an increase in quantity supplied

A vertical supply curve represents:

an independent relationship between price and quantity supplied.

If Max's demand for hot dogs falls as his income rises, then for Max hot dogs are

an inferior good

what is the law of supply

as price increases, quantity supplied increases

Which of the following statements is false? a. An upward-sloping supply curve graphically represents the law of supply. b. A vertical supply curve graphically represents the law of supply. c. If income rises and good X is a normal good, then the demand for good X will rise. d. If income falls and good Y is an inferior good, then the demand for good Y will rise.

b. A vertical supply curve graphically represents the law of supply.

Which of the following statements represents a correct and sequentially accurate economic explanation? a. Good X is an inferior good and good Y is a substitute for X. Income rises, the demand for X falls, the price of X falls, and the demand for Y rises. b. Good X is an inferior good and good Y is a substitute for X. Income rises, the demand for X falls, the price of X falls, and the demand for Y falls. c. Good X is an inferior good and good Y is a substitute for X. Income falls, the demand for X rises, the price of X rises, and the demand for Y falls. d. Good X is an inferior good and good Y is a substitute for X. Income rises, the quantity demanded of X rises, the price of X rises, and the demand for Y falls. e. none of the above

b. Good X is an inferior good and good Y is a substitute for X. Income rises, the demand for X falls, the price of X falls, and the demand for Y falls.

An economist says, "Technological advances have the power to lower the prices of many of the goods we buy." Here is how this works: a. Technological advances lead to lower demand, which leads to lower prices. b. Technological advances lead to greater supply, which leads to lower prices. c. Technological advances lead to greater quantity supplied, which leads to lower prices. d. Technological advances lead to lower taxes, which lead to greater supply, which leads to lower prices. e. Technological advances lead to higher taxes, which lead to fewer subsidies, which lead to greater supply, which leads to lower prices.

b. Technological advances lead to greater supply, which leads to lower prices.

Which of the following will not shift a supply curve? a. a change in the price of relevant resources b. a change in the good's own price c. a change in the number of sellers d. a change in per-unit costs brought about by a change in taxes

b. a change in the good's own price

A rightward shift in the demand curve for tennis balls could be caused by a. a fall in the price of tennis balls. b. a fall in the price of tennis rackets. c. a rise in the price of tennis lessons. d. a fall in income, assuming tennis balls are a normal good.

b. a fall in the price of tennis rackets.

Consider a point on a market demand curve. The point represents a. a single price and the quantity demanded by an individual buyer. b. a single price and the sum of the quantities demanded by all buyers. c. various prices and various quantities demanded. d. a single price and the quantity demanded by an individual buyer at that price and all other prices.

b. a single price and the sum of the quantities demanded by all buyers.

Good Y is an inferior good. If the average income of those who buy good Y rises, the _____________ curve for good Y will shift ____________ resulting in a(n) _____________ in the equilibrium price of Y and a(n) ____________ in the equilibrium quantity of Y. a. supply; rightward; decrease; increase. b. demand; leftward; decrease; decrease c. demand; rightward; increase; increase d. supply; leftward; increase; decrease e. supply; leftward; increase; increase

b. demand; leftward; decrease; decrease

The law of supply states that price and quantity supplied are a. inversely related, ceteris paribus. b. directly related, ceteris paribus. c. not related. d. fixed.

b. directly related, ceteris paribus

Oil producers expect that oil prices next year will be higher than oil prices this year. As a result, oil producers are most likely to a. place more oil on the market this year, thus shifting the present supply curve of oil rightward. b. hold some oil off the market this year, thus shifting the present supply curve of oil leftward. c. place more oil on the market this year, thus increasing the quantity supplied of oil at lower but not higher prices. d. hold some oil off the market this year, thus decreasing the quantity supplied of oil at lower but not higher prices.

b. hold some oil off the market this year, thus shifting the present supply curve of oil leftward.

The law of demand states that price and quantity demanded are a. directly related, ceteris paribus. b. inversely related, ceteris paribus. c. independent. d. positively related, ceteris paribus.

b. inversely related, ceteris paribus.

Which of the following pairs of goods would be most likely to be substitutes? a. pasta and pasta sauce b. olive oil and vegetable oil c. chips and salsa d. tires and automobiles

b. olive oil and vegetable oil

One major reason for the law of demand is that a. one price changing requires at least one other price to change in the opposite direction. b. people substitute relatively lower-priced goods for relatively higher-priced goods. c. a higher price never reduces quantity demanded by enough to lower total revenue. d. people are willing to produce more units at a higher price.

b. people substitute relatively lower-priced goods for relatively higher-priced goods.

The law of demand states that price and ______________ are _____________ related, ceteris paribus. a. demand; inversely b. quantity demanded; inversely c. demand; directly d. quantity demanded; directly e. ​quantity supplied; directly

b. quantity demanded; inversely

If the supply of and demand for a product decrease at the same time, then equilibrium a. quantity and equilibrium price must both decline. b. quantity must decline, but equilibrium price may either rise, fall, or remain unchanged. c. price must fall, but equilibrium quantity may either rise, fall, or remain unchanged. d. quantity must fall and equilibrium price must rise.

b. quantity must decline, but equilibrium price may either rise, fall, or remain unchanged.

On a supply-and-demand diagram, consider a price for which the horizontal distance to the supply curve is shorter than the horizontal distance to the demand curve. There is a __________ at that price and the current price must be __________ the equilibrium price. a. shortage; above b. shortage; below c. surplus; above d. surplus; below

b. shortage; below

An increase in the price of good B caused an increase in the demand for good C. This indicates that goods B and C are a. complements. b. substitutes. c. neither substitutes nor complements. d. normal goods.

b. substitutes.

Demand refers to a. how much of a good people are willing and able to buy at a particular price. b. the different quantities of a good people are willing and able to buy at different prices. c. the different quantities of a good people are willing and able to buy at a particular price. d. how much of a good people are willing to buy at different prices. e. none of the above

b. the different quantities of a good people are willing and able to buy at different prices.

Resource X is necessary to the production of good Y. If the price of resource X falls, a. the supply curve of Y shifts leftward. b. the supply curve of Y shifts rightward. c. the supply curve of Y is unaffected. d. there is a movement down the supply curve of Y. e. there is a movement up the supply curve of Y.

b. the supply curve of Y shifts rightward.

Suppose Smith wants one iPhone no matter what the price is between $0 and $350, Jones wants one iPhone no matter what the price is between $0 and $200, and Griffith wants one iPhone no matter what the price is between $0 and $450. In this case, each individual buyer's demand curve will be __________________ and the market demand curve will be __________________. a. downward sloping; vertical b. vertical; downward sloping c. vertical; vertical d. downward sloping; downward sloping

b. vertical; downward sloping

Which of the following pairs of goods would be most likely to be complements? a. olive oil and vegetable oil b. peanuts and peanut butter c. DVD's and DVD players d. hiking boots and tennis shoes e. all of the above

c. DVD's and DVD players

At a price of $15 each, Marta buys 4 books per month. When the price increases to $20, Marta buys 3 books per month. Luz says that Marta's demand for books has decreased. Is Luz correct? a. Yes, Luz is correct. b. No, Luz is incorrect. Marta's demand has increased. c. No, Luz is incorrect. Marta's quantity demanded has decreased, but her demand has stayed the same. d. No, Luz is incorrect. Marta's quantity demanded has increased, but her demand has stayed the same. e. No, Luz is incorrect. Marta's quantity demanded has decreased and her demand has increased.

c. No, Luz is incorrect. Marta's quantity demanded has decreased, but her demand has stayed the same.

Which of the following is consistent with the law of demand? a. People substitute higher-priced goods for higher-quality goods. b. People substitute some higher-priced goods for other higher-priced goods. c. People substitute lower-priced goods for higher-priced goods. d. People substitute some lower-priced goods for other lower-priced goods.

c. People substitute lower-priced goods for higher-priced goods.

Which of the following is true about the relationship between price and quantity supplied? a. There is always a direct relationship between price and quantity supplied. b. There is always an inverse relationship between price and quantity supplied. c. There is usually a direct relationship between price and quantity supplied. d. There is usually an inverse relationship between price and quantity supplied.

c. There is usually a direct relationship between price and quantity supplied.

If the price a buyer pays for a good is $50 and the maximum price she would be willing and able to pay is $53, then ____________ is _______________. a. producers' surplus; $103 b. consumers' surplus; $103 c. consumers' surplus; $3 d. producers' surplus; $3 e. consumers' surplus; $40

c. consumers' surplus; $3

An increase in the number of sellers of a good will, ceteris paribus, __________________ for that good. a. increase equilibrium price and quantity b. increase equilibrium price and decrease equilibrium quantity c. decrease equilibrium price and increase equilibrium quantity d. decrease equilibrium price and quantity e. increase demand

c. decrease equilibrium price and increase equilibrium quantity

Resource X is necessary to the production of good Y. If the price of resource X falls, the equilibrium price of Y will ______________ and the equilibrium quantity of Y will a. rise; rise. b. fall; fall. c. fall; rise. d. rise; fall.

c. fall; rise.

An increase in the expected price of corn would likely do the following to the current supply and demand for corn: a. increase both the demand and the supply. b. decrease both the demand and the supply. c. increase the demand, but decrease the supply. d. increase the supply, but decrease the demand.

c. increase the demand, but decrease the supply.

Given that frozen yogurt and ice cream are substitutes, a shift in preferences in favor of yogurt would be predicted to do all of the following EXCEPT a. raise the equilibrium price of frozen yogurt. b. increase the quantity supplied of frozen yogurt. c. increase the supply of ice cream. d. increase the demand for frozen yogurt.

c. increase the supply of ice cream.

An "increase in the quantity demanded" means that a. the demand curve has shifted to the right. b. the supply curve has shifted to the left. c. price has declined and consumers therefore want to purchase more of the good. d. given supply, the price of the good can be expected to rise.

c. price has declined and consumers therefore want to purchase more of the good.

A demand schedule is a numerical tabulation of the ___________________ of a good at different ____________________. a. quantity supplied; prices b. quantity demanded; incomes c. quantity demanded; prices d. quantity supplied; incomes

c. quantity demanded; prices

On a supply-and-demand diagram, consider a price for which the horizontal distance to the supply curve exceeds the horizontal distance to the demand curve. There is a __________ at that price and the current price must be __________ the equilibrium price. a. shortage; above b. shortage; below c. surplus; above d. surplus; below

c. surplus; above

An "increase in demand" means that a. the demand curve has shifted to the left. b. price has declined and consumers want to purchase more of the good. c. the demand curve has shifted to the right. d. the price of the good can be expected to decline, assuming supply stays constant.

c. the demand curve has shifted to the right.

"As the price of apples goes up, the demand for apples goes down." The author of this statement a. implies that price and demand are unrelated. b. uses the word "demand" when he should use the word "supply." c. uses the word "demand" when he should use the words "quantity demanded." d. implies that demand and price have a direct relationship.

c. uses the word "demand" when he should use the words "quantity demanded."

As the price of good X rises, the demand for good Y falls. Therefore, goods X and Y are

complements

The "voluntary bumping plan" used by airlines to resolve the problem of overbooked flights was developed by economist a. Adam Smith. b. John Maynard Keynes. c. Alan Greenspan. d. Julian Simon.

d. Julian Simon.

At a price of $9.99, Danielle buys 3 digital books per month. When the price decreases to $7.99, Danielle buys 4 digital books per month. Jason says that Danielle's demand for digital books has increased. Is Jason correct? a. Yes, Jason is correct. b. No, Jason is incorrect. Danielle's demand has decreased. c. No, Jason is incorrect. Danielle's quantity demanded has decreased, but her demand has stayed the same. d. No, Jason is incorrect. Danielle's quantity demanded has increased, but her demand has stayed the same. e. No, Jason is incorrect. Danielle's quantity demanded has increased and her demand has decreased.

d. No, Jason is incorrect. Danielle's quantity demanded has increased, but her demand has stayed the same.

If the workers of a firm successfully negotiate an increase in wages, which of the following is most likely to happen? a. The demand curve for the product the firm produces shifts rightward. b. The demand curve for the product the firm produces shifts leftward. c. The supply curve of the product the firm produces shifts rightward. d. The supply curve of the product the firm produces shifts leftward.

d. The supply curve of the product the firm produces shifts leftward.

Which of the following statements is true? a. To an economist, demand is different from quantity demanded. b. A demand schedule is the numerical tabulation of the law of demand. c. A demand curve is the graphical representation of the direct relationship between price and quantity demanded. d. a and b e. a, b, and c

d. a and b

In year 1 the price of good X is $10 and 100 units are bought and sold. In year 2 the price of good X is $13 and 230 units are bought and sold. What can explain this? a. The supply of good X was higher in year 2 than in year 1 and the demand for good X was the same in year 2 as in year 1. b. The demand for good X was higher in year 2 than in year 1 and the supply of good X was the same in year 2 as in year 1. c. Both the demand for, and supply of, good X were higher in year 2 than in year 1. d. b or c e. a, b, or c

d. b or c

Suppose that for a given good demand decreases and supply increases at the same time. If demand decreases by a greater amount than supply increases, then equilibrium price __________ and equilibrium quantity __________ for that good. a. rises; rises b. rises; falls c. falls; rises d. falls; falls

d. falls; falls

Suppose that for a given good, demand decreases and supply decreases at the same time. If demand decreases by a greater amount than supply decreases, then equilibrium price __________ and equilibrium quantity __________ for that good. a. rises; rises b. rises; falls c. falls; rises d. falls; falls

d. falls; falls

Suppose that for a given good demand increases and supply increases at the same time. If demand increases by a lesser amount than supply increases, then equilibrium price __________ and equilibrium quantity __________ for that good. a. rises; falls b. falls; falls c. rises; rises d. falls; rises

d. falls; rises

The fundamental reason why most supply curves are upward sloping is that a. consumers substitute lower-priced goods for higher-priced goods. b. the quantity supplied increases as more firms enter the market. c. a higher price never reduces quantity supplied by enough to lower total revenue and so higher production is motivated. d. higher production raises the opportunity costs of production and so price must rise to induce more output.

d. higher production raises the opportunity costs of production and so price must rise to induce more output.

A decrease in the expected price of corn would likely do the following to the current supply and demand for corn: a. increase both the demand and the supply. b. decrease both the demand and the supply. c. increase the demand, but decrease the supply. d. increase the supply, but decrease the demand.

d. increase the supply, but decrease the demand.

A "decrease in the quantity demanded" means that a. the demand curve has shifted to the right. b. the supply curve has shifted to the left. c. price has declined and consumers therefore want to purchase more of the good. d. price has increased and consumers therefore want to purchase less of the good.

d. price has increased and consumers therefore want to purchase less of the good.

A change in price will lead to a change in __________ and to a change in __________, while a change in preferences will lead to a change in __________ and a change in the prices of relevant resources will lead to a change in __________. a. quantity supplied; demand; income; supply b. demand; quantity supplied; supply; quantity demanded c. quantity supplied; supply; quantity supplied; demand d. quantity supplied; quantity demanded; demand; supply e. quantity supplied; quantity demanded; supply; demand

d. quantity supplied; quantity demanded; demand; supply

An increase in the number of buyers in a particular market for a good will result in a ___________________ for that good. a. movement up along the demand curve b. movement down along the demand curve c. leftward shift in the demand curve d. rightward shift in the demand curve

d. rightward shift in the demand curve

At a price for which quantity demanded exceeds quantity supplied, a __________ is experienced, which pushes the price __________ toward its equilibrium value. a. surplus; downward b. surplus; upward c. shortage; downward d. shortage; upward

d. shortage; upward

In moving along a demand curve for good X, which of the following is NOT held constant? a. the prices of substitute goods for good X b. the prices of complementary goods for good X c. incomes of consumers of good X d. the price of good X

d. the price of good X

Suppose the government decides that every family should own its own home. To bring this about, the government decides to subsidize the home-construction industry by giving the home-construction companies $10,000 for every house that they build. As a result of this, a. the supply curve of new houses would shift leftward, since it now costs $10,000 more for builders to produce a house. b. the demand curve for new houses would shift rightward, since now every family would want to buy a house. c. the demand curve for new houses would shift leftward. d. the supply curve of new houses would shift rightward, since builders would be willing to produce and sell more houses at each given price.

d. the supply curve of new houses would shift rightward, since builders would be willing to produce and sell more houses at each given price.

One reason that helps to explain the law of supply is the law of

diminishing marginal returns.

if the consumers incomes decrease than the movement on the supply curve will be :

down the supply curve

If the supply curve and the demand curve for lettuce both shift to the left by an equal amount, what can we say about the resulting changes in equilibrium price and quantity? a. The price will increase, but the quantity may increase or decrease. b. The price will increase, and the quantity will increase. c. The price will decrease, and the quantity will increase. d. The price will stay the same, but the quantity will increase. e. The price will stay the same, but the quantity will decrease.

e. The price will stay the same, but the quantity will decrease.

If the producers' surplus is $50, and the consumers' surplus is $40, then what is the minimum selling price of the good? a. $10 b. $40 c. $50 d. $90 e. There is not enough information to answer the question.

e. There is not enough information to answer the question.

Which of the following illustrates the law of demand? a. Jorge buys fewer pencils at $2 per pencil than at $1 per pencil, ceteris paribus. b. Chen buys more ice cream at $4 per half-gallon than at $3 per half gallon, ceteris paribus. c. Karissa buys fewer sweaters at $50 each than at $35 each, ceteris paribus. d. a, b, and c e. a and c

e. a and c

Equilibrium and disequilibrium a. are real world states. b. are mental constructs used by economists. c. foreshadow what is about to happen in a market. d. a and b e. a, b and c

e. a, b and c

The price of X was $10 in year 1 and $14 in year 2. Which of the following could be the correct reason for the rise in price? a. The demand for X was higher in year 2 than in year 1, ceteris paribus. b. The supply of X was lower in year 2 than in year 1, ceteris paribus. c. The demand was higher, and the supply was lower, in year 2 than in year 1. d. a and b e. a, b, and c

e. a, b, and c

If a demand curve shifts rightward, this means a. quantity demanded is greater only at one particular price. b. quantity demanded is greater at every price. c. buyers are willing and able to purchase more of the good at every price. d. buyers are willing and able to purchase less of the good at every price. e. b and c

e. b and c

The equilibrium price of a good in market A is $24. The current price of the good in market A is $21. At this price, a(n) ________________________ of the good exists in market A. a. surplus b. shortage c. excess supply d. excess demand e. b and d

e. b and d

A simultaneous decrease in the demand and the supply of good X always leads to a decrease in the price of good X. a. True b. False

false

An increase in supply is graphically represented by a leftward shift of the supply curve.

false

As long as the maximum buying price of a good is less than the minimum selling price of that good, an exchange will occur.

false

At equilibrium in a market, scarcity does not exist.

false

Demand takes into account goods, but not services.

false

Economists use the terms neutral good and normal good interchangeably. a. True b. False

false

If the quantity demanded of good X is greater than the quantity supplied of good X, then the market for good X is in disequilibrium.

false

In general, all markets equilibrate at the same speed.

false

In moving along a demand curve, everything is held constant except buyers' income. a. True b. False

false

The law of diminishing marginal utility helps to explain the direct relationship between price and quantity supplied. a. True b. False

false

The law of diminishing marginal utility helps to explain why supply curves are generally upward sloping.

false

The terms scarcity and shortage are synonyms. a. True b. False

false

To an economist, an increase in demand means the same thing as an increase in quantity demanded. a. True b. False

false

When a market is in disequilibrium, such as when the quantity supplied of a good is greater than the quantity demanded of that good, the price of the good will rise, ceteris paribus.

false

what is an inferior good

goods that consumers demand less of when their incomes rise

what is an inferior good

goods that consumers demand less of when their incomes rise(ex. mcdonalds)

what is a normal good

goods that consumers demand more of when their incomes rise

demand is

how much the person wants

if the price is below equilibrium price and they are asking what it will result in

it is a shortage

if the price is above equilibrium price and they are asking what it will result in

it is a surplus

Economists state that the __________ utility a person receives from a unit of a good, the __________ the price he or she is willing to pay for it.

more; higher(or vice versa)

what is producers surplus

price received minus minimum selling price

At a price below the equilibrium price, there is

shortage

As the price of good A rises, the demand for good B rises. Therefore, goods A and B are

substitutes

If the U.S. government imposes a more restrictive import quota on Japanese video gaming systems, the ____________ curve for Japanese video gaming systems in the U.S. will shift ___________.

supply; leftward

quantity demanded is

the amount of a good or service that a buyer is able and willing to purchase at a given price.

what is producer's surplus

the difference between the amount the producer is willing to supply goods for and the actual amount received by him when he makes the trade

If the price of a substitute to good X increases, then

the price of x will increase and the quantity demanded will go down

A change in demand is graphically represented by a shift in the demand curve.

true

A change in quantity demanded is represented by a movement along a given demand curve.

true

A demand curve is the graphical representation of the law of demand. a. True b. False

true

A surplus will occur in a market when the price of the product is above the equilibrium price. a. True b. False

true

Consumers' surplus is the difference between the maximum price the buyer is willing and able to pay for a good and the actual price paid. a. True b. False

true

Goods X and Y are substitutes. The price of X falls, the quantity demanded of X rises, and the demand for Y falls.

true

If the government increased licensing requirements for beauty salons, the supply curve for salon services would shift to the left. a. True b. False

true

Mutually beneficial trade between buyers and sellers drives a market to equilibrium.

true

On the basis of the law of demand, it is more likely that a person will lose his temper when the price of losing his temper is low than when it is high.

true

Price and quantity supplied are directly related, ceteris paribus.

true

Supply curves are usually upward sloping. a. True b. False

true

The sum of consumers' surplus and producers' surplus is maximized at equilibrium. a. True b. False

true

f hot dogs are an inferior good, a decrease in income will cause the equilibrium price of hot dogs to rise. a. True b. False

true

if the actual price of the thing goes up then it is a shift along the line, but if one of the factors of supply or demand changes then it is a shift left or right

true

if the price of a good goes down there will be a movement in the demand curve up (not shift)

true

if the price of a good goes up there will be a movement in the demand curve down (not shift)

true

more labor, increased technology, more supplues will push PPF right

true

shortage causes price to go up, surplus causes price to go down

true

shortage exists at any price below equilibrium price

true

unemployment will not shift PPF just move down it

true

Supply curves are ________________ upward sloping.

usually