Microeconomics (Chapt 3)

Refer to the diagram. The highest price that buyers will be willing and able to pay for 100 units of this product is

$60

A normal good is one

for which the consumption varies directly with income

A market is in equilibrium

if the amount producers want to sell is equal to the amount consumers want buy

The demand curve shows the relationship between

price and quantity demanded

The law of demand states that, other things equal,

price and quantity demanded are inversely related

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

When the price of a product rises, consumers with a given money income rises and thus permits consumers to purchase more of the product. This statement describes

the substitution effect

At the equilibrium price,

there are no pressures on price to either rise or fall

If there is a surplus of a product, its price

is above the equilibrium level

Refer to the diagram. The equilibrium price and quantity in this market will be

$1.00 and 200

Refer to the diagram, A surplus of 160 units would be encountered if the price was

$1.60

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

an increase in supply

A recent study found that an increase in the federal tax on beer (which would increase the price of beer) would reduce the demand for marijuana. Based on this information we can conclude that

beer and marijuana are complementary goods

A shift to the right in the demand curve for product A can be most reasonably explained by saying that

consumer preferences have changed in favor of A so that they now want to buy more at each possible price

At the current price, there is a shortage of a product. We would expect price to

increase, quantity demanded to decrease, and quantity supplied to increase

College students living off-campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start careers, their consumption of both goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are

inferior goods

Refer to the diagram. A decrease in quantity demanded is depicted by a

move from point y to point x

The law of supply indicates that, other things equal,

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

The term "quantity demanded"

refers to the amount of a product that will be purchased at some specific price

Refer to the diagram. A decrease in demand is depicted by a

shift from D2 to D1

Refer to the diagram. A decrease in supply is depicted by a

shift from S2 to S1

An improvement in production technology will

shift the supply curve to the right

Refer to the diagram. A price of $20 in this market will result in a

shortage of 100 units

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

An increase in the excise tax on cigarettes raises the price of cigarettes by shifting the

supply curve for cigarettes leftward

Graphically, the market demand curve is

the horizontal sum of individual demand curves

When the price of a product falls, the purchasing power of our money income rises and thus permits consumers to purchase more of the product. This statement describes

the income effect