Macro Chapter 3

With a downsloping demand curve and an upsloping supply curve for a product, an increase in consumer income will

increase equilibrium price and quantity if the product is a normal good.

Price floors and ceiling prices both

interfere with the rationing function of prices.

The law of demand states that, other things equal

price and quantity demanded are inversely related

An increase in the quantity demanded means that

price has declined and consumers therefore want to purchase more of the product.

Allocative efficiency is concerned with

producing the combination of goods most desired by society.

If we say that a price is too high to clear the market, we mean that

quantity supplied exceeds quantity demanded.

If there is a surplus of a product, its price

If there is a surplus of a product, its price

If two goods are complements,

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

What will not cause the demand for product K to change?

a change in the price of product K

If producers must obtain higher prices than before to produce a given level of output, then the following has occurred

a decrease in supply

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

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity?

an increase in supply

The rationing function of prices refers to the

capacity of a competitive market to equalize quantity demanded and quantity supplied

Black markets are associated with

ceiling prices and the resulting product shortages.

With a downsloping demand curve and an upsloping supply curve for a product, placing an excise tax on this product will

increase equilibrium price and decrease equilibrium quantity.

An inferior good is

one that consumers buy less of as their income rises

An effective price ceiling will

result in a product shortage.

An improvement in production technology will

shift the supply curve to the right

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

supply curve of product X will shift to the right.

A normal good is one

the consumption of which varies directly with incomes.

Graphically, the market demand curve is

the horizontal sum of individual demand curves.

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

the price of the product will rise.

In constructing a demand curve for product X,

the prices of other goods are assumed constant.

By an "increase in demand," economists mean that

the quantity demanded at each price in a set of prices is greater.

If an effective ceiling price is placed on hamburgers, then

the quantity demanded will exceed the quantity supplied, a black market for hamburgers may evolve, the price charged will be below the market-clearing price.

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