Chapter 1-4

Suppose chips and salsa are complements. An increase in the price of salsa will cause: A. An upward movement along the demand curve for salsa. B. A leftward shift of the demand curve for salsa. C. A leftward shift of the demand curve for chips. D. An downward movement along the demand curve for chips.

A and C are correct

supply curve

A curve that shows the relationship between the price of a product and the quantity of the product supplied.

demand schedule

A table showing the relationship between the price of a good and the amount that buyers are willing and able to purchase at various prices

Duppose Congress passes a new tax that decreases the income of Detroit residents. If donuts are a normal good, this will cause the demand for donuts to

Decrease

All else the same, when the supply of a good or service rises, then equilibrium price will also tend to rise.

False

If the price of a good is currently below its equilibrium price, there is a surplus of the good on the market and we can expect the price of the good to increase.

False

Which of the following would cause an increase in the equilibrium price of Pepsi?

The government decides to impose a tax on the sale of all carbonated beverages, such as Pepsi..

this is a Market

You have a garage sale and you put a price on each item based on what you think you can sell it for. The buyers come to your sale and often try to negotiate a lower price.

A decrease in the demand for a good can be expected to cause _____ in the equilibrium price of the good and _____ in the equilibrium quantity of the good bought and sold, all else the same.

a decrease : a decreas

inferior good

a good that consumers demand less of when their incomes increase

perfectly competitive market

a market that meets the conditions of 1) many buyers and sellers, 2) all firms selling identical products, and 3) no barriers to new firms entering the market

supply schedule

a table that shows the relationship between the price of a good and the quantity supplied

You observe the price of a good rises and the quantity sold increases. This is the result of

an increase in demand

Assume apples and oranges are substitutes for consumers. A winter freeze destroys half the orange crop. In the market for apples, we can expect

an increase in the demand for apples.

shifts the supply curve rightward

an increase in the number of companies producing this good

which of the following shifts the supply curve rightward?

an increase in the number of companies producing this good

An increase in the price of coffee will cause

an upward movement along the demand curve for coffee.

The law of demand states, that all else the same

as the price of a good rises, the quantity demanded of the good falls

normal goods

causes an increase in demand as income increases

During a recession (downturn) in the economy firms lay off workers and the unemployment rate rises. During these times we can expect the demand for normal goods to ___ and the demand for inferior goods to ____.

decrease : increase

An inferior good is a good for which demand

decreases when income increases

An inferior good is a good for which demand

decreases when income increases.

market

place (physical or virtual) where buyers and sellers interact and determine the price of a good.

quantity demanded

the amount of a good that buyers are willing and able to purchase

quantity supplied

the amount of a good that sellers are willing and able to sell

Law of Demand

the claim that, other things being equal, the quantity demanded of a good falls when the price of the good rises

Law of Supply

the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises

Each point on the supply curve represents

the lowest price buyers will pay for another unit of the good.

Suppose the quantity demanded of a good is larger than the quantity supplied of a good. We can expect:

the price of the good to increas

Suppose people believe the price of gas will decrease next week. This is most likely to cause

today's demand for gas to decrease.

An increase in the cost of producing a good or service will cause a leftward shift of the supply curve.

true

if supply and demand both increase then equilibrium quantity will also increase.

true