Microeconomics

Which of the following illustrates the relationship between a good and its complement?

- When the price of tuition decreases, the demand for textbooks increases. -When the price of lettuce increases, the demand for salad dressing decreases.

One of the determinants of demand is ______ expectations.

Consumer

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

buying and selling decisions are consistent

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

decrease

Substitute Goods and Services

goods or services that may be used in place of another good or service

The supply curve illustrates the relationship between ______.

price and quantity supplied

Which of the following are determinants of supply?

- prices of other goods - producer expectations - taxes and subsidies

Which of the following are determinants of supply? (Check all that apply.)

- resource prices - technology - taxes and subsidies

Which of the following factors increase the demand for any good or service?

-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

Choose all of the following that will cause a change in supply, not quantity supplied.

-Technology - Producer expectations - Number of sellers

______,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.

A decrease in the supply of a good

Which of the following refers to government financial assistance for the production of a good which lowers producers' costs and increases supply?

A subsidy

Which of the following causes consumers to buy larger quantities of a product at each possible price?

An increase in the number of buyers.

True or false: For many people, Coke and Pepsi are complements.

False

What are two goods called when a change in the price of one good has little or no effect on the demand for the other?

Independent Goods

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

Price Reason: The law of supply states that, all else equal, the quantity supplied rises or falls as prices rise or fall.

What determines market price and equilibrium output in a market?

The interaction of buyers and sellers

Other things equal, which of the following is correct regarding increasing the number of sellers in an industry?

The market supply becomes greater

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

True

True or false: When the price of one product rises, the demand for its substitute will increase.

True

Complementary Goods

Two goods that provide more utility when consumed together than when consumed separately

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

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).

The effects on equilibrium price and quantity due to an increase in supply and a simultaneous decrease in demand are shown by ______.

a decrease in equilibrium price and an indeterminate change in equilibrium quantity

According to the law of supply, price and quantity supplied have a(n) ______ relationship.

direct

Producer expectations refer to firms' expectations of ______ for a good or service that they produce.

future prices

independent goods

goods that are not related to one another

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

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.

Greater resource prices _______ the costs of production, thereby, ______ the incentive for firms to produce the good at each price.

increases; reducing

The equilibrium price where the quantity demanded equals the quantity supplied is otherwise known as the _____________ - _____________ price

market; clearing

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

movement along; shift of

The determinant of supply dealing with alternative products that can be produced by firms is called ______.

price of substitutes in production

Competition among corn producers forces them to use the best technology and right mix of productive resources; otherwise their costs will be too high relative to the market price and they will be unprofitable. This is best described as ______.

productive efficiency

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

rise; fall

A change in demand is represented by a ______ the demand curve while a change in quantity demanded is represented by a _______ the demand curve.

shift of; movement along

Greater resource prices _______ the costs of production, thereby, ______ the incentive for firms to produce the good at each price.

supplied; price

Improvements in technology is a determinant of ______.

supply

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

supply

The ability of the competitive forces of supply and demand to establish a price at which selling and buying decisions are consistent is called ______.

the rationing function of prices