Econ Chap 3

Assuming competitive markets with typical supply and demand curves, which of the following statements is correct?

An increase in demand with no change in supply will result in an increase in sales.

The relationship between quantity supplied and price is___, and the relationship between quantity demanded and price is__.

direct, inverse

Assume, in a competitive market, price is intitally below the equilibrium level. We predict that price will:

increase, quantity demanded will decrease, and quantity supplied will increase.

Determinants of supply

resource prices, technology, taxes and subsidies, prices of other goods, expected price and the number of sellers in the market

Assume a drought in the Great Plains reduces the supply of wheat. Since wheat is a basic ingredient in the production of bread, and potatoes are consumer substitute for bread, we would expect the price of wheat to:

rise, the supply of bread to decrease, and the demand for potatoes to increase.

If the price of K declines, the demand curve for the complementary product J will:

shift to the right.

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

some firms leaving an industry.

In 2007 the price of oil increased, which in turn caused the price of natural gas to rise. This can best be explained by saying that oil and natural gas are:

substitute goods and the higher price for oil increased the demand for natural gas.

A normal good is one:

the consumption of which varies directly with incomes

In presenting the model of a demand curve, economists presume the most importatnt vairiable in determining the quantity demanded is:

the price of the product itself

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.

If Z is an inferior good, an increase in money income will shift the:

demand curve for Z to the left.

Which of the following would NOT shift the demand curve for beef?

A reduction in the price of cattle feed.

In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by:

a change in buyer tastes

A rightward shift in the demand curve for product C might be caused by:

a decrease in the price of a product that is complementary to C.

If two goods are complements:

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

DVD players and DVDs are:

complementary goods.

An increase in the price of a product will reduce the amount of it purchased because:

consumers will substitute other products for the one whose price has risen

Determinants of demand

consumers' tastes, the number of consumers in the market, consumers' incomes, the prices of relative goods, and expected prices

The law of demand states that:

price and quantity demanded inversely related

The law of supply indicates that:

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

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.

If the price of a product increases, we would expect:

quantity supplied to increase.