Chapter 3 Economics

What might cause a demand function to shift to the right?

An increase in the price of a substitute.

Which of the following is NOT a condition for maximizing total economic surplus in a particular market?

Government regulation of the market is needed.

Suppose one could rent a car or take the train to go to Chicago from Washington, D.C. If the price of train tickets increases

the demand for rental cars will increase.

When a market is not in equilibrium

the economic motives of sellers and buyers will move the market to its equilibrium.

If supply decreases while demand increases simultaneously, the new equilibrium price is ___________ and the new equilibrium quantity is _________________.

higher; indeterminate

An increase in the quantity demanded of tea occurs whenever

the price of the tea falls.

Efficiency occurs when

the socially optimal quantity of goods and services is being produced.

A shortage occurs when

quantity demanded exceeds quantity supplied.

According to the equilibrium principle,

market equilibrium exploits all opportunities for individual gain, but may not exploit gains possible through collective action.

One observes that the equilibrium price of rice falls and the equilibrium quantity falls. Which of the following best fits the observed data?

A decrease in demand with supply constant