Supply and Demand

An increase in the price of a good would be illustrated on a demand graph as a:

Movement along the demand curve upward

A decrease in the price of a good would be illustrated on a supply graph as a:

Movement along the supply curve downward.

If good A is considered to be an inferior good, when incomes rise:

The demand for good A will decrease and the demand curve will shift to the left.

If the price of peanut butter were to increase, what would likely happen to the demand for jelly?

The demand for jelly would decrease—the demand curve would shift left.

If two goods are complements, an increase in the price of one good will cause a decrease in the demand for the other.

True

A government-imposed price floor, above the equilibrium price, in the market for a good or service will result in:

A surplus of the good or service

If consumers expect higher coffee prices in the future:

The demand for coffee will increase now

An improvement in technology used by producers of a certain good will result in:

An increase in supply of the good

An increase in the average incomes of consumers will result in:

An increase in the demand for goods and services.

If producers expect the price of a good to rise, what will happen to the good's equilibrium price and quantity?

Equilibrium price will increase and equilibrium quantity will decrease

If the government imposes a tax on the production of a good or service, what will happen to the equilibrium price and quantity of the good?

Equilibrium price will increase and equilibrium quantity will decrease

If the number of consumers in the market for good A increases, what will happen to the equilibrium price and quantity of good A?

Equilibrium price and quantity will both increase

If a good is considered "normal" by economists, an increase in consumers' incomes will result in a decrease in the demand for the good.

False

If the government decides to subsidize the production of a good, the result would be a decrease in the equilibrium price and a decrease in the equilibrium quantity.

False

When the price of good A rises, people start to drink good B. In this case:

Good B is a substitute good

According to the law of demand, as the price of a good or service increases, the

Quantity demanded of the good or service will decrease

According to the law of supply, if the price of a good or service increases:

Quantity supplied will increase

If the price of one of the resources used to produce a good decreases:

The supply curve for that good would shift right.