ECON 1A Quiz #2: Supply and Demand

What does law of demand state? a. As incomes increase, people consume more of all goods. b. The demand for a good increases with the number of consumers in the market. c. As the price of a good increases, consumers purchase less of that good. d. The supply of a good increases in proportion to the demand for it.

As the price of a good increases, consumers purchase less of that good

(Figure: Demand Shift) Which of the following could explain the figure? a. Consumer income increases in the market for a normal good. b. Consumer income falls in the market for a normal good. c. Consumer income rises in the market for an inferior good. d. Consumer income remains the same and the price of the good falls.

Consumer income increases in the market for a normal good

Which of the following statements is TRUE? a. Consumer surplus is the difference between the maximum price a consumer is willing to pay for a good or service and its market price. b. Bill is willing to pay $10 for a pound of clay. If he buys a pound of clay at a market price per pound of $5, his consumer surplus is $2. c. Total consumer surplus is represented graphically by the area beneath the demand curve. d. Total consumer surplus is represented graphically by the area above the demand curve.

Consumer surplus is the difference between the maximum price a consumer is willing to pay for a good or service and its market price

For an inferior good, higher income results in: a. an increase in demand. b. a decrease in demand. c. a movement up along the demand curve. d. a movement down along the demand curve.

a decrease in demand

A decrease in demand refers to: a. a rightward shift of the demand curve. b. a leftward shift of the demand curve. c. an upward movement along the demand curve. d. a downward movement along the demand curve.

a leftward shift of the demand curve

In the market for fertilizer, an: a. increase in the wage rate will increase the demand for fertilizer. b. advance in technology will increase the supply of fertilizer. c. increase in the wage rate will increase the supply of fertilizer. d. increase in the cost of equipment will increase the supply of fertilizer.

advance in technology will increase the supply of fertilizer

The quantity demanded of a good or service is the amount that: a. consumers are willing and able to buy at a given price. b. firms are willing to sell during a given time period at a given price. c. a consumer would like to buy but might not be able to afford. d. a consumer needs to consume during a given time period.

consumers are willing and able to buy at a given price

Total producer surplus equals: a. the supply curve. b. the area above the supply curve and beneath the market price. c. the area beneath the supply curve and above the demand curve. d. the market price.

the area above the supply curve and beneath the market price

To economists, the term consumer surplus means: a. the excess money consumers have left over, after purchasing goods. b. the difference between the price a consumer is willing to pay, and the price that suppliers are willing to accept. c. the consumer's gain from trading. d. the difference between the price a consumer is able to pay and willing to pay.

the consumer's gain from trading

An increase in demand shifts the demand curve: a. up and to the right. b. down and to the right. c. up and to the left. d. down and to the left.

up and to the right