Principles of Macroeconomics Ch. 3

If two goods are complements:

a decrease in the price of one will increase the demand for the other

Economists use the term "demand" to refer to:

a schedule of various combinations of market prices and amounts/quantities demanded

A surplus of a product will arise when price is:

above equilibrium, with the result that quantity supplied exceeds quantity demanded

Which of the following will cause the demand curve for product A to shift to the left?

an increase in money income if A is an inferior good

An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction assumes that:

bicycles are normal goods

Blu-ray players and Blu-ray discs are:

complementary goods

A shift to the right in the demand curve for product A can be most reasonably explained by saying that:

consumer preferences have changed in favor of A so that they now want to buy more at each possible price

There will be a surplus of a product when:

consumers want to buy less than producers offer for sale

If X is a normal good, a rise in money income will shift the:

demand curve for X to the right

The relationship between quantity supplied and price is _____ and the relationship between quantity demanded and price is _____.

direct; inverse

A price floor means that:

government is imposing a minimum legal price that is typically above the equilibrium price

A market is in equilibrium:

if the amount producers want to sell is equal to the amount consumers want to buy

When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes the:

income effect

A government subsidy to the producers of a product:

increases product supply

Tennis rackets and ballpoint pens are:

independent goods

College students living off-campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start careers, their consumption of both goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are:

inferior goods

Price floors and ceiling prices:

interfere with the rationing function of prices

A market:

is an institution that brings together buyers and sellers

The demand curve shows the relationship between:

price and quantity demanded

The law of supply indicates that, other things equal:

producers will offer more of a product at high prices than at low prices

Allocative efficiency is concerned with:

producing the combination of goods most desired by society

Other things equal, if the price of a key resource used to produce product X falls, the:

product supply curve of X will shift to the right.

An effective ceiling price will:

result in a product shortage

An effective price floor will:

result in a product surplus

An improvement in production technology will:

shift the supply curve to the right

If the price of product L increases, the demand curve for close-substitute product J will:

shift to the right

A leftward shift of a product supply curve might be caused by:

some firms leaving an industry

When the price of a product rises, consumers with a given money income shift their purchases to other products whose prices are now relatively lower. This statement describes:

substitution effect

Other things equal, which of the following might shift the demand curve for gasoline to the left?

the development of a low-cost electric automobile

Which of the following would most likely increase the demand for gasoline?

the expectation by consumers that gasoline prices will be higher in the future.

In presenting the idea of a demand curve, economists presume the most important variable in determining the quantity demanded is:

the price of the product itself

If there is a shortage of product X, and the price is free to change:

the price of the product will rise

At the point where the demand and supply curves for a product intersect:

the quantity that consumers want to purchase and the amount producers choose to sell are the same

Productive efficiency refers to:

the use of the least-cost method of production

At the equilibrium price:

there are no pressures on price to either rise or fall

Which of the following is most likely to be an inferior good?

used clothing

If the demand curve for product B shifts to the right as the price of product A declines, then:

A and B are complementary goods