Economics Test 2

A supply curve is ______________ sloping, illustrative the direct relationship between price and quantity supplied *

upward

Suppose the government sets a maximum price on gasoline at price P2. What has this created, and what will it lead to in the market?

a price ceiling, a shortage

Suppose the government sets a minimum price on corn at price P2. What has this created, and what will it lead to in the market? *

a price floor, a surplus

The law of supply states that a/an ______________ relationship exists between price and quantity supplied.

direct

The demand curve is _____________ sloping, illustrating the inverse relationship between price and quantity demanded. *

downward

A decrease in the quantity demanded can be shown by:

movement up, along the demand curve

Which of the following would most likely cause a shift from D1 to D2?

A decrease in the price of a substitute

An increase in the price of a product would create which of the following change: *

A decrease in the quantity demanded for a product

Which of the following choices would cause the change shown in the graph?

An increase in the number of consumers

The increase in the price of milk results in a decrease in the demand for cereal. These two products must be:

Complements

Which of the following scenarios could cause the change depicted in the graph above?

Consumers' income increased

If Jell-O is an inferior good, what will happen when consumers' income decreases? *

Demand for Jell-O will increase

Burritos are a normal good. What will happen when the consumers' income decreases? *

Demand for burritos will decrease

When a product is a want instead of a need it tends to be: *

Elastic

When a modest increase in price has little to no effect on the quantity demanded the demand for that product is

Inelastic

Which of the following scenarios would cause the change depicted in the graph above?

Input prices and wages increase

Supply Which of the following choices would cause the change shown in the graph: *

Inputs become less expensive

The law of demand states that a/an ______________ relationship exists between price and quantity demanded. *

Inverse

A decrease in the quantity supplied can be shown by

Movement up, along the supply curve

The decrease in the price of hotdogs results in a decrease in the demand for hamburgers. These two products are:

Substitutes

In the graph above, what happened to the equilibrium price and quantity when the supply curve moved from D1 to D2? *

The equilibrium price decreased and equilibrium quantity increased

Which of the following choices would most likely cause the change shown on the graph?

The number of buyers in the market decrease

An increase in the price of a product would cause the following change:

an increase in the quantity supplied for a product

Equilibrium Analysis This occurs when quantity demanded is greater than quantity supplied:

shortage

A government payment to a business that offsets the cost of production is called a: *

subsidy