Chapter 3- Supply and Demand

Information campaigns about tobacco hazards and taxes on tobacco are two ways to discourage its use. Which one decreases demand for smoking?

The Information campaign on hazards of tobacco

Information campaigns about tobacco hazards and taxes on tobacco are two ways to discourage its use. Which one decreases demand for smoking? Correct Answer

The Information campaign on hazards of tobacco

Increased competition due to a greater number of producers will cause

lower prices due to an increase in the quantity supplied at every price.

The downward slope of a demand curve illustrates the pattern that as ________ decreases, ________ increases.

price; quantity demanded

If demand decreases and supply remains constant, what happens to the market equilibrium?​

quantity rises and price falls

Equilibrium occurs at the point where

quantity supplied = quantity demanded

Excess demand will result in suppliers ________ prices, which encourages demanders to demand ________ .

raising prices; less

If a technology change reduces a company's production costs, it will

shift the supply curve to the right.

law of demand

states that more of a good will be demanded (bought) the lower its price, and less of a good will be demanded (bought) the higher its price, ceteris paribus (other things being equal)

law of supply

states that more of a good will be provided the higher its price; less will be provided the lower its price, ceteris paribus (other things being equal)

When higher prices result in higher quantity supplied, economists call this relationship

the law of supply

equilibrium price

the price where quantity demanded is equal to quantity supplied

equilibrium quantity

the quantity at which quantity demanded and quantity supplied are equal for a certain price level

A severe freeze has damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of

the supply curve.

Suppose Congress passes legislation that offers subsidies to orange farmers. The impact on the market for orange juice will be a rightward shift of

the supply curve.

quantity demanded

the total number of units of a good or service that consumers are willing to purchase at a given price

quantity supplied

the total number of units of a good or service that producers are willing to sell at a given price

A competitive market is one in which

there is a large number of buyers and sellers

When quantity demanded decreases in response to a change in price

there is a movement from one point to another along the demand curve.

When quantity demanded increases in response to a change in price

there is a movement from one point to another along the demand curve.

The city of Portland aims to increase tourism. A recent study showing the high popularity of doughnuts causes the city to subsidize its doughnut shops. What happens in the market for doughnuts in Portland?

-Doughnut prices fall. -The quantity supplied and the quantity demanded both rise.

In order to deal with a budget deficit, the city of Portland reduces its subsidy of doughnut shops. What happens in the market for doughnuts in Portland?

-Doughnut prices rise. -The equilibrium quantity falls.

The conditions of demand and supply are given in the table below. What is the equilibrium price?

2.80

If price was $2.00 per gallon and decreased to $1.40 per gallon, how does quantity demanded of gasoline change?

460 million gallons to 600 million gallons

At a price of $16, quantity demanded is ________, quantity supplied is ________; therefore excess ________ has occurred.

5, 35; supply

If price was $1.40 per gallon and increased to $2.00 per gallon, how does quantity of gasoline demanded change?

600 million gallons to 460 million gallons

If an increase in the price of Nike shoes increases the demand for Adidas shoes, this means that

Nike shoes and Adidas shoes are substitutes.

If demand increases and supply remains constant, what happens to the market equilibrium?​

Quantity and price both rise.​

A change in price does not move the demand curve.It only shows a difference in the quantity demanded.

The demand curve will move left or right when there is an underlying change in demand at all prices.

An decrease in the quantity supplied can result from

a decrease in price

Which of the following will shift the supply curve to the right?

a decrease in the price of inputs to production

substitute

a good that can replace another to some extent, so greater consumption of one good tends to mean less of the other

demand curve

a graphic representation of the relationship between price and quantity of a certain good or service demanded, with quantity on the horizontal axis and the price on the vertical axis

supply curve

a line that shows the relationship between price and quantity supplied on a graph, with quantity supplied on the horizontal axis and price on the vertical axis

free market

a market in which the government does not intervene in any way

inferior good

a product whose demand falls when income rises, and vice versa

normal good

a product whose demand rises when income rises, and vice versa

demand schedule

a table that shows a range of prices for a certain good or service and the quantity demanded at each price

supply schedule

a table that shows a range of prices for a good or service and the quantity supplied at each price

market economy

an economy in which economic decisions are decentralized, resources are owned by private individuals, and businesses supply goods and services based on demand

command economy

an economy where economic decisions are passed down from government authority and where resources are owned by the government; also called a "planned economy"

The supply curve will shift to the right if which of the following occurs?

an improvement in technology

According to the law of demand, assuming other factors are held constant

as the price of bread increases, the quantity of bread demanded will decrease.

According to the law of demand, assuming other factors are held constant

as the price of milk decreases the quantity of milk demanded will increase

According to the law of supply, assuming other factors are held constant

as the price of milk decreases, the quality of milk supplied will decrease

shortage

at the existing price, the quantity demanded exceeds the quantity supplied; also called "excess demand"

surplus

at the existing price, the quantity supplied exceeds the quantity demanded; also called "excess supply"

Excess demand occurs when the actual price in some market is ________ the equilibrium price.

below

When ________, business firms will collectively supply a higher quantity of output at any given price, and the supply curve will shift to the right.

costs of production fall

Which country has characteristics of a command economy?

cuba

Complete the following sentence: If people think that the price of televisions will decrease in the near future, that belief may cause a(n)

decrease in the demand for televisions today

Market economies are based on private enterprise, which means

economic decision making happens through markets

The point at which quantity demanded equals quantity supplied is called

equilibrium

In a market with an upward sloping supply curve and a downward sloping demand curve, when the actual price must be higher than the equilibrium price, there will be

excess supply

outputs

goods or services

complements

goods that are often used together, so consumption of one good tends to enhance consumption of the other

Decreased competition because of fewer producers in a market will cause

higher prices due to a decrease in the quantity supplied at every price

Two common ways to discourage tobacco use are taxes on tobacco and information campaigns on the hazards of tobacco use. Which one causes a shift in the demand curve for smoking?

information campaign on hazards of tobacco

market

interaction between potential buyers and sellers; a combination of demand and supply

competitive market

large market in which there is a large number of buyers and sellers, so that no one can control the market price

Excess supply will result in suppliers ________ prices, which encourages consumers to demand ________ .

lowering; more

ceteris paribus

other things being equal

What would cause the level of demand (meaning the relationship between price and quantity demanded) to shift?

population grows in a particular market area

A demand curve shows the graphical relationship between quantity demanded and

price

A supply curve is a graphical illustration of the relationship between quantity supplied and

price

The relationship between the price in a market and the amount that producers collectively make available for sale, is referred to as

supply

supply

the amount of a good or service that a producer is willing to supply at each price

demand

the amount of a good or service that consumers are willing and able to purchase at each price

inputs

the combination of labor, materials, and machinery used to produce goods and services; also called "factors of production"

A free market is described by which of the following statements?

the government does not intervene in any way

In general, supply curves slope

upward from left to right

price

what a buyer pays for a unit of a specific good or service

In a planned economy, government determines the prices for goods and services, and

what goods will be produced

shift in demand

when a change in some economic factor (other than price) causes a different quantity to be demanded at every price

shift in supply

when a change in some economic factor (other than price) causes a different quantity to be supplied at every price

subsidy

when the government pays a firm directly or reduces the firm's taxes if the firm carries out certain actions

equilibrium

when the quantity demanded is equal to the quantity supplied