Chapter 4: Demand, Supply, and Markets (Review)

As money income increases, consumers tend to substitute used furniture with new furniture. Used furniture is an example of a(n):

inferior good.

Other things remaining constant, a higher price for a good _____ that good.

makes producers more willing to increase the quantity supplied of

An increase in supply means that:

producers are willing to sell more at each price.

The law of supply states that:

the price and quantity supplied of a product are positively related.

When the price of wheat increases, _____.

the producers of bread will supply less bread at each price

When a market is in equilibrium, _____.

the quantity demanded is equal to the quantity supplied

Demand is the relationship between the price of a good and:

the quantity of the good consumers are willing and able to buy.

An increase in the equilibrium price and quantity in a market occurs when there is a:

rightward shift of the demand curve, given an upward-sloping supply curve.

A decrease in the equilibrium price and an increase in the equilibrium quantity occurs when there is a:

rightward shift of the supply curve, given a downward-sloping demand curve.

If the prices of all goods changed by the same percentage, _____.

there would be no substitution effect of the price changes of goods on the quantity demanded

According to the law of supply, _____.

the higher the price of a product, the greater the quantity supplied

The coordination that occurs through markets takes place not because of some central plan but because of _____.

the invisible hand

A summer in Miami turned out to be warmer than usual, causing people to consume more cola. This can be represented by:

a rightward shift of the demand curve for cola.

As personal income increases, consumers are willing and able to buy more of a good at each price. This causes:

a rightward shift of the demand curve.

Which of the following is true of the market demand curve for a good?

It is the sum of the individual demand curves of all consumers in the market.

Which of the following is the best example of transaction costs?

The amount of time a person spends looking for a house

Suppose the demand for and the supply of a good increases simultaneously. Which of the following is likely to be true in this case?

The equilibrium quantity increases, unequivocally.

According to the income effect, a drop in the price of a normal good:

increases the real income of consumers and they tend to buy more of the good.

A decrease in the price of cocoa will most likely lead to:

an increase in the supply of chocolate