ECO 3003 Chapter 3
Which of the following are reasonss for the inverse relationship between price and quantity demanded?
A higher price makes if more likely the consumer will substitute another good; Consumption is subject to diminishing marginal utility; People ordinarily buy more of a product at a low price than at a high price; A lower price increases the purchasing power of a buyer's income, enabling a buyer to purchase more of a product.
From an economic perspective, which of the following are true of a market?
A market is a virtual and/or physical institution or space; In a market, buyers and sellers interact in their desire to buy and sell a good or service.
Which of the following in the rental market for housing benefits renters, but makes it unprofitable for suppliers or landowners?
A price ceiling
An increase in the equilibrium quantity and indeterminate change in equilibrium price is a result of which of the following?
A simultaneous and proportional increase in supply and demand.
Which of the following statements describes the law of demand?
All other things being equal, as price decreases, quantity demanded increases; All other things being equal, as price increases, quantity demanded decreases.
Which of the following reflects an increase in demand, while holding supply constant?
An increase in both equilibrium price and quantity
Which of the following are effects of a decrease in supply while holding demand constant?
An increase in equilibrium price and a decrease in equilibrium quantity.
A decrease in equilibrium price and indeterminate result on equilibrium quantity is a result of which of the following?
An increase in supply and simultaneous and proportional decrease in demand.
The demand for a normal good would likely increase in which of the following cases?
An increase in the number of buyers; A decrease in the price of complementary goods.
Which of the following statements are true?
An increase in the price of a normal good would decrease the quantity demanded of the good; A decrease in consumer's income would decrease the demand for a normal good.
Which of the following statements are true?
An increase in the price of a normal good would decrease the quantity demanded of the good; A decrease in the consumer's income would decrease the demand for a normal good
Which of the following would result in a change in supply?
An increase or decrease in wages; An increase in the excise tax on cigarettes; An increase in the number of shoe stores at the local mall
Which of the following scenarios describe the appropriate effects on equilibrium price and quantity due to a decrease in supply while holding everything else constant?
An oil spill causes several fisherman to leave the shrimp business and the equilibrium price of shrimp increases while quantity decreases; A fishing tax is placed on all shrimp and the equilibrium quantity decreases.
Which of the following decrease the demand for any good or service?
An unfavorable change in consumer tastes; Falling incomes and the product is a normal good; A decrease in the price of a substitute good.
Which of the following illustrates a change in quantity demanded (Qd)?
As a result of increasing prices, Mr. Snow decides to buy fewer shovels during a snowy winter.
How do improvements in productive technology enable firms to produce more units of output?
By utilizing fewer resources, thereby lowering costs
Which of the following are determinants of demand?
Consumer expectations; Number of buyers; Prices of related goods; Consumer tastes
Equilibrium price in a market changes when there is a change in which of the following?
Demand; supply
An improvement in production technology for a specific good will cause a(n):
Drop in price and increase in quantity demanded.
Which of the following describe the effects on equilibrium price and equilibrium quantity as a result of a decrease in supply and a simultaneous increase in demand?
Equilibrium price rises and the change in equilibrium quantity is indeterminate.
________ is the quantity at which the intentions of buyers and sellers match, so that the quantity demanded and the quantity supplied are equal.
Equilibrium quantity
Which of the following decrease the demand for a good or service?
Falling incomes and the product is a normal good; A decrease in the price of a substitute good; An unfavorable change in consumer tastes.
A shortage occurs when quantity supplied exceeds quantity demanded.
False
In the supply and demand model, quantity demanded is illustrated on the verticle axis, which price is illustrated on the horizontal axis.
False
Which of the following best explains why economists "sound the alarm" when politicians advocate government-controlled prices such as price ceilings or price floors?
Government-controlled prices may cause potential environmental damage; Government-controlled prices cause shortages; Government-controlled prices cause surpluses; Government-controlled prices distort resource allocation
In which of the following situations will quantity supplied exceed the quantity demanded?
In the imposition of a price floor
Consumers Suppliers
Price is an obstacle Price represents revenue
In which of the following situations do governments intervene to prevent prices from rising above or falling below their equilibrium levels?
Prices are too low for firms; Prices are too high for consumers
A change in which of the following will increase or decrease supply and cause the supply curve to shift to the right or left, respectively?
Resource prices; The number of sellers
"Because of unusually good growing conditions, the supply of strawberries has substantially increase." This statement indicates:
The amount of strawberries that will be available at various prices has increase.
Which of the following specifically refers to demand?
The buyer side of any market.
Goods X and Y are complements while goods X and Z are substitutes. If the supply of good X increases:
The demand for Y will increase while the demand for Z will decrease.
What determines market price and equillibrium output in a market?
The interaction of buyers and sellers
A decrease in the price of a product will increase the amount of quantity demanded because:
The lower price includes more customers to use this product instead of other products.
Which of the following statements are true?
The price of Coke increase, therefore the equilibrium price and quantity of Pepsi increase; Recently the popularity of 3-D television increased significantly, therefore the equilibrium price and quantity of 3-D television also increased; Consumers expect the price of shrimp to increase in the future, therefore the equilibrium price and quantity increase now.
A change in quantity demanded is caused by an increase or decrease in the price of the product under consideration and nothing else.
True
A substitute good is one that is used in place of another good.
True
A surplus is when quantity supplied exceeds quantity demanded.
True
Which of the following illustrates teh relationship between a good and its complement?
When the price of lettuce increases, the demand for salad dressing decreases; When the price of tuition decreases, the demand for textbooks increases
If consumer incomes increase, the demand for product X:
Will shift to the right if X is a normal good
A decrease in demand while holding supply constant results in ____ in both equilibrium price and quantity.
a decline
A decrease in demand while holding supply constant results in:
a decrease in both equilibrium price and quantity
A decrease in supply and a simultaneous and proportional decrease in demand will result in ____ equilibrium quanity, with ____ equilibrium price.
a decrease in; an indeterminate effect on
The inverse relationship between price and quantity demanded can be shown graphically by ___ sloping curve.
a downward
Which of the following consists of a large number of independently acting buyers and sellers?
a highly-competitive market
What are the characteristics of a competitive market?
a large number of buyers and sellers acting independently; buying and selling standardized products.
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 refers to a particular apportionment or mix of goods and services most highly valued by society?
allocative efficiency
An increase in the equilibrium price of a good and an indeterminate change in the equilibrium quantity is the result of:
an increase in demand and decrease in supply
The price actually paid for a good is not reflected in the demand because demand is merely a statement of ____ buying of the good.
buyer's intentions regarding the
A price __________ is the maximum legal price a seller may charge for a product or service.
ceiling
At the market ___ price, quantity demanded equals quantity ____.
clearing; supplied
A _____ good is one that is used together with another good.
complementary
The determinants or demand, other things equal, are assumed to be _____ when a demand curve is drawn or computed
constant.
One of the determinants of demand is _____ expectations.
consumer
The ____ incurred by firms when producing a good or service arise from the prices of the inputs that are used to produce said good or service.
cost of production
If the price of hot dogs increases, the demand for hot dog buns will
decrease
Change in the number of buyers is a determinant of market:
demand
The law of ____ is illustrated by a downward-sloping curve.
demand
With a price ceiling, the quantity of a product _____ will exceed quantity _____, resulting in a persistant shortage of the product.
demanded; supplied
The basic _____ of ______, or supply shifters, are resource prices, technology, taxes and subsidies, prices of other goods, producer expectations, and the number of sellers in the market.
determinants of supply
Consumers experience _______ marginal utility the more they consume of a particular good or service.
diminishing
Which of the following are examples of market?
eBay; A local gas station; The New York Stock Exchange
Changes in ___ about future price of a product may affect the producer's current willingness to ___ that product.
expectations; supply
A price __________ is a minimum price fixed by the government, generally imposed above the price, which is otherwise known as the equilibrium price.
floor
Producer expectations refer to the firms' expectations of ____ for a good or service that they produce.
future prices
Government may place legal limits on prices when it is determined that prices are unfairly ____ for buyers or unfairly ____ for sellers.
high; low
An increase in demand while holding supply constant results in a(n) _____ in both equilibrium price and quantity.
increase
Higher resource prices ____ the costs of production.
increase
A favorable change in consumer tastes and preferences for a product will ______ demand, shifting the demand curve to the _______:
increase; right
The vast majority of goods that are not related to one another are called _____ goods.
independent
Products that have decreased demand when consumer incomes rise and increased demand when consumer incomes fall are called _____ goods.
inferior
Other things equal, when price falls, the quantity demanded rises. This represents the _____ relationship between the price and quantity demanded.
inverse
When two variables are being examined, and one variable move one way and the other variable moves in the opposite direction, this is called a(n):
inverse relationship
A demand curve shows the:
inverse relationship between price and quantity demanded for a product
if costs of production rise, the producer has an incentive to produce ___________ output.
less
The income effect indicates that a ____ price increases the purchasing power of income, enabling consumers to purchase _____ of a product and vice versa.
lower; more
If the government subsidizes the production of a good, it in effect ______ the producers' costs and _____ supply.
lowers; increases
The added cose of producing one more unit of output is called ____ cost.
marginal
The demand by a consumer for a good or service essentially reflects the _____ benefit of the good or service based on the utility received.
marginal
The equilibrium price where the quantity demanded equals the quantity supplied is otherwise known as the ___-clearing price.
market
For every good or service, the quantities demanded by individual consumers at every price are added together to compute ____ for a good or service.
market demand
Other things equal, firms will produce and offer for sale _____ of their product at a high price than at a low price.
more
An inverse relationship between two variables is a(n) _____ relationship.
negative
The law of demand describes a ______ relationship between the price of a good or service and the quantity demanded of the good or service.
negative
According to the law of supply, price and quantity supplied have a(n) _____ relationship.
positive
A change in demand occurs due to a change in a consumer's state of mind about purchasing a product that is based on something other than the ____ of the product.
price
A change in quantity demanded (Qd) is caused by an increase or decrease in the _____ of the product under consideration and nothing else.
price
When drawing a supply curve ____ is labeled on the vertical axis.
price
When drawing demand and supply curves, economists are assuming that the primary influence on production and purchasing decisions is:
price
The supply curve illustrates the relationship between:
price and quantity supplied
The interaction between buyers and sellers, which determines equilibrium _____ and equilibrium ____, is illustrated by the intersection of the demand and supply curves.
price; quantity
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
When an economist says that the demand for a product has increased, this means that:
quantity demanded is greater at each possible price
An increase in demand while holding supply constant ____ equilibrium price and _______ equilibrium quantity.
raises; raises
The price of ____ goods is a determinant of demand.
related
The price of _____ goods is a determinant of demand.
related
A change in ____ causes the supply curve of a product to shift leftward or rightward.
resource prices
The prices of ____ used in the production process help determine the costs of production incurred by firms.
resources
If the increase in demand is greater than the decrease in supply, the equilibrium quantity will ___.
rise
When a price ceiling is enacted, the new price is established below the old equilibrium price, quantity demanded ___ and quantity supplied _____ thus creasting disequilibrium.
rises; falls
A ____ the demand curve represents a change in demand while a ____ the demand curve represents a change in the quantity demanded.
shift of; movement along
An increase in supply: A decrease in supply:
shifts the curve to the right shifts the curve to the left
Government controlled prices cause:
shortages; surpluses; distortions in resource allocation
The ___ suggests that at lower prices, buyers have an incentive to substitute less expensive products for similar products that are now relatively more expensive.
substitution effect
Products whose demand varies directly with changes in money or income are called normal goods, or ______ goods:
superior
The supply curve measures quantity ___ on the horizontal axis and ____ on the vertical axis.
supplied; price
An increase in ____, while holding demand constant, results in a decrease in equilibrium price, but an increase in equilibrium quantity.
supply
Improvements in technology is a determinant of :
supply
Market ________ is a schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each possible price during a specific period.
supply
Other things equal, the fundamental characteristic of the law of ____ is that as the price falls, the quantity supplied of a product falls.
supply
The number of sellers or competitors in a market is a determinant or shifter of the ____ curve.
supply
The prices of substitute goods in production is a determinant of:
supply
______ refers to the production of a product, whereas demand refers to the consumption of a product.
supply
When the number of sellers or producers in an industry increases, _______ of a particular good or service will ______. When the number of sellers in an industry ______, supply of a particular good or service will _____.
supply; rise; decrease; fall
Which of the following curve shows the quantities of a product that will be purchased at various possible prices, other things equal?
the demand curve
When movie ticket prices increase, families tend to spend less time watching movies and more time at home watching videos instead. This best reflects:
the substitution effect
An increase in the number of hair salons will cause:
the supply curve of hair salon services to shift to the right.
A necessary condition for the demand of a good is that a consumer must be ___.
willing and able to buy the good