ECO 2023 - Chapter 3 Assignment

quantity demanded; demand Reason: It is imperative that you review the difference between Qd and demand. Qd is influenced by the price of a good in a market, while demand is driven by factors other than the price of a good in a market.

A change in ______ refers to a movement along the demand curve in response to changes in the price of a good or service, whereas a change in ______ refers to a shift of the demand curve leftward or rightward in response to anything other than changes in the price of a good or service.

shift of; movement along

A change in supply is represented by a _____ the supply curve while a change in quantity supplied is represented by a ______ the supply curve.

demand

A change in the number of buyers is a determinant of market _______.

a decrease in both equilibrium price and quantity Reason: To illustrate, begin at a market in equilibrium (intersection of supply and demand). Shift the demand curve to the left (downward) to represent a decrease in demand. Note that the new intersection of supply and demand results in a lower price and lower output (along the x-axis).

A decrease in demand while holding supply constant results in ______.

increase; decrease Reason: To illustrate, start at a market in equilibrium. Shift the supply curve to the left to represent a decrease in supply. Hold demand constant. Observe the change in price and quantity as a result of the shift in the supply curve.

A decrease in supply while holding demand constant results in a(n) ______ in equilibrium price, and a(n) ______ in equilibrium quantity.

inverse relationship between price and quantity demanded for a product

A demand curve shows the ______.

floor

A government-set minimum price, such as for agricultural products, is called a price _____.

ceiling or cap

A price (floor/ceiling) is the maximum legal price a seller may charge for a product or service.

A decrease in supply and a simultaneous increase in demand Reason: A simultaneous decrease in supply and demand would shift both curves to the left illustrating a clear decrease in equilibrium quantity.

An increase in equilibrium price and indeterminate effect on equilibrium quantity is a result of which of the following?

decrease; increase Reason: Shifting supply to the right to reflect an increase, while holding demand constant results in a falling price, but greater equilibrium quantity.

An increase in supply while holding demand constant results in a(n) ______ in equilibrium price, but a(n) ______ in equilibrium quantity.

the supply curve of hair salon services to shift to the right

An increase in the number of hair salons will cause:

increase

An increase in the price of a substitute good, such as Nike running shoes, will likely _____ the demand for Reebok running shoes.

diminishing

Consumers experience ______ marginal utility the more they consume of a particular good or service.

rise; fall

If prices for a good or service are expected to increase in the future, demand for that good or service will ______ today. If prices are expected to decrease in the future, demand will ______ today.

rise

If the decrease in the supply of a good is greater than the decrease in the demand for the good, the equilibrium price will ______.

lowers; increases

If the government subsidizes the production of a good, it in effect ______ the producers' costs and ______ supply.

supply Reason: Quantity supplied is affected solely by price, whereas changes in supply are due to factors other than the price of a good or service. Review the difference between changes in Qs versus changes in supply.

Improvements in technology is a determinant of ______.

In the imposition of a price floor. Reason: A price ceiling is imposed below equilibrium price and as such would result in quantity demanded exceeding quantity supplied.

In which of the following situations will quantity supplied exceed the quantity demanded?

surpluses distortions in resource allocation shortages

Select all that apply. Government-controlled prices cause ______.

An increase in the number of buyers An increase in the price of a substitute good A rise in consumer income if the product is a normal good

Select all that apply. Which of the following factors increase the demand for any good or service?

When the price of lettuce increases, the demand for salad dressing decreases. When the price of tuition decreases, the demand for textbooks increases. Reason: With Nikes and Reeboks, they are substitutes, not complements. While hamburgers and hot dogs may be found or eaten together, they are still considered substitute goods. They do not possess a complementary relationship such as that found between cars and gasoline.

Select all that apply. Which of the following illustrates the relationship between a good and its complement?

With the imposition of the controls, quantity supplied decreases. This policy tends to create an excess demand of the product. With the imposition of the controls, quantity demanded rises. Reason: Because of the excess demand that is created, the market ends up out of equilibrium.

Select all that apply. Which of the following statements describe the results of the imposition of rent controls?

Blank 1: market Blank 2: clearing

The equilibrium price where the quantity demanded equals the quantity supplied is known as the _____ - _____ price.

equilibrium

The interaction between buyers and sellers determines the equilibrium price and the ____ quantity.

Blank 1: price Blank 2: quantity, output, or amount

The interaction between buyers and sellers, which determines the equilibrium ____ and ____, is illustrated by the intersection of the demand and supply curves.

buy more at a low price

The law of demand is consistent with common sense because people ordinarily ______.

supply

The prices of substitute goods in production is a determinant of ____.

resources, resource, input, or inputs

The prices of the _____ used in the production process help determine the costs of production incurred by firms.

productive Reason: Allocative efficiency refers to the particular mix of goods and services most highly valued by society, assuming minimum-cost production.

The production of a good or service in the least costly way is known as ______ efficiency.

buying and selling decisions are consistent Reason: The rationing function refers to establishing consistent buying and selling decisions.

The rationing function of prices refers to the ability of the competitive forces of supply and demand to establish a price at which ______.

negative

The relationship between the price of a good or service and the quantity demanded of that good or service described by the law of demand is ______.

price and quantity supplied Reason: The demand curve illustrates the relationship between price and quantity demanded.

The supply curve illustrates the relationship between ______.

an upward

The supply curve is ______ sloping curve.

independent

The vast majority of goods that are not related to one another are called ______ goods.

a fall in income

The willingness and ability of a consumer to buy a normal product falls because of Blank______.

False Reason: A price at or above the price floor is legal; a price below it is not legal, hence the reason for a floor on the price, meaning the price cannot fall below the floor.

True or false: A price at or above the price floor is illegal.

rises; falls Reason: Quantity demanded would not fall, and quantity supplied would not rise.

When a price ceiling is enacted, the new price is established below the old equilibrium price, quantity demanded ______ and quantity supplied ______ thus creating disequilibrium.

price

When drawing a supply curve, ______ is labeled on the vertical axis.

greater; shortage

When rent controls are imposed, quantity demanded will be ______ than quantity supplied, resulting in a persistent ______.

The change in price is indeterminate and quantity rises. Reason: An increase in supply & demand is illustrated as shifts of both curves to the right. The new equilibrium occurs with an indeterminate change to price. However, quantity does rise.

Which of the following describes the effects on equilibrium price and equilibrium quantity as a result of a simultaneous increase in supply and demand?

An increase in demand for digital cameras over 35mm cameras.

Which of the following exemplifies a change in buyers' tastes?

The buyer side of any market Reason: The seller side refers specifically to the supply side.

Which of the following specifically refers to demand?

Complementary & Substitute goods Reason: Inferior & Normal goods are affected by changes in income.

Which of the following types of goods affect the demand for another product due to a change in their price? (Select all that apply)

A decrease in the number of buyers Reason: This is simply an increase in the population. An increase in the population leads to an increase in the demand for all goods and services. The aging population may reduce their demand for certain goods as they grow older, but they also increase their demand for other goods such as health care, travel, entertainment, to name a few.

Which of the following would most likely lead to a decrease in demand?

An increase in consumer income is likely to increase the demand for a normal good.

Which statement about demand and supply is true?

Higher; reduce Reason: Resources are inputs to production. If the cost of resources rises, they raise production costs and lower profits.

______ resource prices raise production costs and, assuming a fixed product price, ______ profits.

A decrease in the supply of a good Reason: A decrease is illustrated as a shift of the supply curve upward or to the left. If demand is constant and the equilibrium changes, there must be a change in supply. In this case, the supply must decrease.

______, while holding demand constant, results in an increase in the equilibrium price of the good, but a decrease in the equilibrium quantity of the good.

supply

The number of sellers or competitors in a market is a determinant or shifter of the _____ curve.

price

The only factor that causes a movement along the supply curve is:

buyers' intentions regarding the

The price actually paid for a good is not reflected in the demand because demand is merely a statement of ______ buying of the good.

Blank 1: increase or raise Blank 2: right or rightward

A favorable change in consumer tastes and preferences for a product will _____ demand, shifting the demand curve to the _____ (right/left).

demanded

A shortage results from an excess of quantity _______.

price and quantity supplied

According to the law of supply, which two things are directly related?

price of substitutes in production Reason: Do not confuse this with "price of related goods" on the demand side. This clearly states substitutes in production which hint to the supply side of the market.

All the following are the determinants of demand except ______.

decrease; increase

An increase in business taxes causes a(n) ______ in supply and will ______ production costs.

increase

An increase in demand while holding supply constant results in a(n) ______ in both equilibrium price and quantity.

increase

When the price of Coke rises, the demand for Pepsi is likely to ______.

decrease

When the price of a product falls, demand for its substitute will ______.

Hots dog and hamburgers Reason: The other examples - Golf balls and golf clubs; CDs and CD players; and Snow boards and lift tickets - are complements and thus are used together.

Which exemplifies a pair of substitute goods?

shift of; movement along

A ______ the demand curve represents a change in demand while a ______ the demand curve represents a change in the quantity demanded.

supply

A change in ______, rather than a change in the quantity supplied, means a change in the schedule or a shift of the supply curve.

less and less utility; reduced Reason: Successive units in consumption always yield less utility than prior ones.

Diminishing marginal utility states that less satisfaction is derived from each successive unit of a product consumed. Therefore, the law of demand is upheld because, as each successive unit yields ______, consumers will buy additional units only if the price of those units is progressively ______.

relatively more expensive

Due to the substitution effect, buyers have an incentive to buy less expensive products in place of similar products that have become ______.

It will increase.

During natural disasters, there often ends up being shortages of various goods such as water. What will happen to the price when the quantity demanded exceeds the quantity supplied?

equal, being equal, or the same

During the second quarter, the price of Jonah's burgers remains constant, but the price of Sam's burgers increases. Other things _______, the law of demand indicates that fewer Sam's burgers will be purchased than in the previous quarter.

increase, raise, expand, or boost

In general, a firm will (increase/decrease) the output of a good or service if the price of the good is rising.

inferior

Goods whose demand varies inversely with money income are called ________ goods.

By utilizing fewer resources, thereby lowering costs

How do improvements in productive technology enable firms to produce more units of output?

the network effects are present

If a consumer demand for a product shifts to the right as the base of users grows, ______.

fall Reason: Beginning at equilibrium, shift the demand curve to the left (representing a decrease). Follow it up by shifting the supply curve to the right (representing an increase) by a smaller amount than the shift in the demand curve. Note the decrease in quantity.

If a decline in demand is greater than an increase in supply, the equilibrium quantity will ______.

fall

If a decrease in demand is greater than a decrease in supply, equilibrium price will ______.

fall Reason: A larger shift in supply to the right, than a rightward shift of demand results in a lower price.

If an increase in supply is greater than an increase in demand, the equilibrium price will ______.

A substitute good

In the marketplace, what is a good that can be used in place of another good called?

A complementary good

In the marketplace, what is a good that is used together with another good?

negative, or inverse,

Other things equal, when price falls, quantity demanded rises. This represents the ______ relationship between price and quantity demanded.'

more Reason: There is a positive or direct relationship between price and quantity supplied (Qs), so that when price rises, Qs rises and vice versa.

Other things equal, firms will produce and offer for sale ______ of their product at a high price than at a low price.

increase

Other things equal, if consumers believe that gas prices will rise in a week, the demand for gas today will ______.

supply

Other things equal, the fundamental characteristic of the law of _______ is that as the price falls, the quantity supplied of a product falls.

supply or production

Producer expectations of future prices are a determinant of _____.

fall Reason: Begin at a market in equilibrium. Now shift the supply curve to the left (decrease) and shift the demand curve to the right but by less than the shift in supply (increase). The new intersection (equilibrium) should show a decrease in output.

Suppose the market for a good is in equilibrium. Assume that there is a decline in the supply of the good and an increase in the demand for the good. If the decline in supply is larger than the increase in demand, the equilibrium quantity will ______.

Quantity Price Supply Demand

Select all that apply. All competitive markets involve which of the following?

lowers the cost of production increases supply

Select all that apply. If the government of a country subsidizes the production of a good, it ______.

Prices are too low for firms. Prices are too high for consumers.

Select all that apply. In which of the following situations do governments intervene to prevent prices from rising above or falling below their equilibrium levels?

Resource prices Taxes and subsidies Technology Reason: Producers' expectations of future prices are a determinant of supply, not consumer expectations.

Select all that apply. Which of the following are determinants of supply?

People retiring and leaving the cities where they worked People leaving the small towns where they grew up to look for job opportunities

Select all that apply. Which of the following exemplify a decrease in the demand for goods due to a decrease in the number of buyers?

congestion effect

The decrease in demand for a product that occurs because more people are using the product is called the ________.

the price of related goods

Substitute goods and complementary goods refer to which determinant of demand?

equilibrium

The _____ output is the quantity at which quantity demanded equals quantity supplied in a competitive market.

network

The ______ effect occurs when the demand for a product increases because more people are using the product.

False Reason: A change in one or more of the non-price determinants of supply results in a shift of the whole supply curve. A change in price results in movements along a supply curve.

True or false: A change in one of the determinants of supply results in a movement along the supply curve.

False Reason: A change in supply is represented by a SHIFT of the supply curve, not a movement along the supply curve.

True or false: A change in supply is represented by a movement along the curve, not a shift of the curve.

True Reason: When quantity supplied exceeds quantity demanded, it creates a surplus.

True or false: A surplus is when quantity supplied exceeds quantity demanded.

False

True or false: An increase in the sales, property or any other tax will decrease production costs and increase supply.

True Reason: Input costs are a major factor that affects the supply of a good or service and will shift the supply curve.

True or false: Resource costs or changes in these costs to production are responsible for shifts in the supply curve.

True Reason: The law of demand can be explained through the income effect because our willingness and ability to consume are directly related to the effect that prices have on the purchasing power of our income.

True or false: The law of demand can be supported by the income effect.

normal good

Upon receiving a substantial raise, Jessie increased her monthly consumption of beef. This information best exemplifies the relationship between income and a(n) ______.

Price Reason: The law of supply that states, all else equal, the quantity supplied rises or falls as prices rise or fall. Cost is not the same as price. Price is the price of a good or service, whereas the cost is the price of the resources used to produce a good. The difference between price and cost is a premium to the seller. The costs of resources affect supply and not quantity supplied.

Which of the following has the greatest effect on the quantity supplied?

An increase in the number of buyers.

Which of the following is likely to cause an increase in the demand for a good or service?

Equilibrium price falls and the change in equilibrium quantity is indeterminate.

Which of the following shows the effects on equilibrium price and quantity due to an increase in supply and a simultaneous decrease in demand?

demand

A change in supply or a change in _____ will disturb equilibrium price.

left

As firms leave an industry, supply decreases. This is illustrated as a shift of the supply curve to the _____.

normal; inferior Reason: Superior goods is another name for normal goods.

As people's income increases, the demand for ______ goods goes up but the demand for ______ goods goes down.

be greater than

At any price below equilibrium price, or price ceiling, quantity demanded will ______ quantity supplied resulting in a persistent excess demand or shortage of product.

Blank 1: demanded or demand Blank 2: supplied or supply

At the equilibrium price, quantity _____ equals quantity _____.

expectations; supply Reason: Producers supply product to the market. If firms make a purchase, they are on the demand side of the market.

Changes in ______ about the future price of a product may affect the producer's current willingness to ______ that product.

demand

Consumer expectations are a determinant of _______.