Economics: UNIT: MICROECONOMICS: SUPPLY, DEMAND, AND PRICE

Daily Market for Graphic Tees at the Clothing Shop On this graph, the equilibrium point occurs at which price? $6 $9 $12 $15

✔ $9

Use the drop-down menu to complete each statement. According to this graph, at $10 the quantity supplied is about ________. As the price of the good rises, the quantity supplied will ________________ based on consumer demand.

✔ 14 and ✔ increase

The graph shows a supply curve. Which events could cause the change in supply shown on this graph? Check all that apply. A producer goes out of business. A natural disaster causes production to drop. A new company joins the marketplace. A company begins to produce more goods. A resource needed to produce more of the good has became scarce.

✔ A producer goes out of business., ✔ A natural disaster causes production to drop., and ✔ A resource needed to produce more of the good has became scarce.

Supply and Demand Equilibrium Match each term with the correct part of the graph. ____ Demand curve ____ Supply curve ____ Equilibrium point

✔ B, ✔ A, and ✔ C

Equilibrium occurs when supply and demand coordinate to set excess demand. set prices and production. maintain excess supply. raise prices and production.

✔ set prices and production.

Demand is a powerful force in a free market. In three to four sentences, explain some of the factors that cause changes in demand and why it is important for consumers to understand these changes.

Demand changes when the quantity demanded at every price changes. This happens when consumers' willingness and ability to buy changes. Demand shifts can be caused by changes in income and in consumer tastes and preferences. Demand is also influenced by changes in the price of a complementary good or in the price of a substitute. Demand shifts cause changes in markets. When consumers understand the basics of demand they understand that their buying choices are important. Consumer demand influences which goods and services are available, the quantities available, and the prices of the goods and services we buy.

John is selling his pizza for $6 per slice in an area of high demand. However, customers are not buying his pizza. Using what you learned about the principles of equilibrium, write three to four sentences about how John could solve his problem.

Sample response: John's prices are too high. This is causing excess supply: John's workers can make many pizzas, but at these high prices, consumers are only demanding a small amount. If the price per slice decreased, consumers would demand more of John's pizza. This means that business would move toward a point of equilibrium, where supply matches demand at the appropriate price.

Supply is a powerful force in a free market. In two to three sentences, explain some of the factors that cause shifts in supply and what effects these shifts may have.

Sample response: Shifts in supply occur when the amount of goods available increases or decreases. Shifts in supply can happen when regulations are created, when competitors produce similar goods, or when the availability of labor or resources changes.

The chart shows a combined supply and demand schedule. According to this table, what will happen when the price of a pair of shoes rises from $100 to $125? The cost to make a pair of shoes will rise. A scarcity of shoes will result. Profits from selling shoes will increase. Consumers will want to buy fewer pairs of shoes.

✔ Consumers will want to buy fewer pairs of shoes.

Which is the best title for this diagram? The Definition of Supply Factors That Affect Supply Elasticity and Competition The Law of Supply

✔ Factors That Affect Supply

Which best explains how the law of demand affects consumers? It helps consumers know when prices are going down. It helps consumers know when prices are going up. It helps consumers tell producers when prices are too high. It helps consumers tell producers when to make new goods.

✔ It helps consumers tell producers when prices are too high.

The graph shows excess supply. Which needs to happen to the price indicated by p2 on the graph in order to achieve equilibrium? It needs to be increased. It needs to be decreased. It needs to reach the price ceiling. It needs to remain unchanged.

✔ It needs to be decreased.

Which is likely to occur if there is a price increase for a good which exhibits elastic demand? People might buy a more expensive substitute good. People might buy a less expensive complementary good. People might buy a less expensive substitute good. People might buy a more expensive complementary good.

✔ People might buy a less expensive substitute good.

Which occurs during market equilibrium? Check all that apply. Supply and demand meet at a specific price. Supply is slightly greater than demand. Supply and demand meet at a specific quantity. Supply and demand meet at a demand point. Supply and demand meet at a supply point.

✔ Supply and demand meet at a specific price. and ✔ Supply and demand meet at a specific quantity.

Which best describes what happens to the amount of a good or service that is supplied to consumers? The amount of a good or service can change. The amount of a good or service always remains the same. The amount of a good cannot change. The amount of a service cannot change.

✔ The amount of a good or service always remains the same.

Which explains the connection between the law of demand and excess demand? The law states that decreases in price leads to greater quantity demanded and limited supply, which occurs during excess demand. The law states that increases in price increases leads to greater quantity demanded and limited supply, which occurs during excess demand. The law states that decreases in price leads to greater supply and equilibrium, which occurs during excess demand. The law states that increases in price leads to greater supply and equilibrium, which occurs during excess demand.

✔ The law states that decreases in price leads to greater quantity demanded and limited supply, which occurs during excess demand.

The graph shows a point of equilibrium. If quantity demanded exceeds quantity supplied, what most likely needs to happen to achieve equilibrium? The supply needs to increase The price needs to decrease The price needs to increase The demand needs to increase

✔ The price needs to increase

The graph shows excess demand. Which needs to happen in order to stop disequilibrium from occurring? Q needs to be coordinated with supply. Q needs to be coordinated with demand. The price of goods needs to be increased. The price of goods needs to be decreased.

✔ The price of goods needs to be increased.

This graph shows a supply curve. What happens when the price of a good increases? The quantity of goods that are produced increases. The producer of the good is certain to make less money. The quantity of goods that are produced decreases. The quantity of goods that are produced stays about the same.

✔ The producer of the good is certain to make less money.

Which best describes the relationship between consumers and producers? They usually ignore each other. They interact with each other. They agree on prices. They dislike each other.

✔ They interact with each other.

In Country A, the price of wheat has increased greatly over the past year. Because of this change, farmers in Country A are planning to grow more wheat in the next few years. In the sample scenario, what does this mean about the elasticity of wheat in relation to supply? Wheat is relatively inelastic. Wheat is elastic. Wheat is inelastic. Wheat is relatively elastic.

✔ Wheat is relatively inelastic.

Consider this scenario. In recent years, many Americans have started to pay more attention to the amount of sugar and calories in their diets. Some soft-drink companies are concerned about consumers' desires to be healthier. They believe that this could result in a drop in demand for their products. Which factor affecting demand does this scenario illustrate? a change in the number of people in the population a change in the price of a substitute good from a rival soft-drink company a change in consumer tastes and preferences a change in the price of a complementary good from a potato chip company

✔ a change in consumer tastes and preferences

The graph shows a demand curve. What changes does the graph show? an increase in demand a decrease in demand a stable demand and an increase in price a decrease in both the quantity demanded and the quantity supplied

✔ a decrease in demand

Supply Curve Which change is illustrated by the shift taking place on this graph? an increase in supply a decrease in supply an increase in demand a decrease in demand

✔ a decrease in supply

Read the scenario below and then answer the question. Sample scenario: Scientists have created a new grass seed that stops grass growth at a specific length, eliminating the need to mow the lawn. The price of this seed is high, but many consumers still want to use it. As a result, several different producers supply a large amount of this seed to consumers. In order to attract consumers to their product, some producers lower their prices and supply fewer bags of seeds. What is the best description of the grass seed that is described in this scenario? a good with a low price a good with a high price a good with an inelastic supply a good with an elastic supply

✔ a good with an elastic supply

On a graph, an equilibrium point is where a supply curve and a demand curve meet. a supply curve is higher than a demand curve. the supply and demand curves head up. the supply and demand curves head down.

✔ a supply curve and a demand curve meet.

A custom furniture company has recently learned that a natural disaster has affected its oak wood supply. Because of this disaster, the furniture company has decided to produce a new line of furniture using pine, because it is more readily available. Based on the information presented in the scenario, which factor is affecting the supply created by the furniture company? elasticity of supply the law of supply competition ability to produce

✔ ability to produce

The law of demand applies most directly to which group? buyers sellers producers lawmakers

✔ buyers

Producers hoping to earn profits supply goods and services to debtors. themselves. competitors. consumers.

✔ consumers.

This demand curve demonstrates the law of demand. The law of demand states that as the price of a good rises, the quantity demanded of that good will ________________. As the price of a good falls, the quantity demanded of that good will decrease ________________.

✔ decrease and ✔ increase

On a graph, when demand ____________________, the demand curve shifts to the left.

✔ decreases

As the price per pair of running shoes rises, the quantity demanded is __________________. When the price is $100.00, ___ pairs of shoes are demanded. The quantity demanded decreases by ___ when the price increases from $50.00 to $150.00.

✔ decreasing, ✔ 60, and ✔ 80

On a graph, a(n) _______________________ shows the demand portion of equilibrium.

✔ demand curve

This demand curve has shifted. The original demand curve is labeled as D. The new demand curve is labeled as D1. What change is taking place on this graph? demand is increasing price is decreasing demand is decreasing demand is remaining constant

✔ demand is increasing

A chart that shows the connection between consumer demand and price is a market schedule. market curve. demand curve. demand schedule.

✔ demand schedule.

Use this graph to answer the following questions. In this example, what is occurring within the market? What is there an excess of? What could solve the problem shown in this graph?

✔ disequilibrium, ✔ demand, and ✔ higher prices

A car dealer who does not have enough customers for a supply of new cars faces equilibrium. disequilibrium. coordination. excess demand.

✔ disequilibrium.

Both excess supply and excess demand are a result of equilibrium. disequilibrium. overproduction. elasticity.

✔ disequilibrium.

Use the drop-down menu to complete each statement. A good is considered __________ when producers can quickly supply more or less of it based on changing prices. A good is considered __________ when producers cannot quickly change how much of it is supplied when prices change.

✔ elastic and ✔ inelastic

Consider these situations. In each situation, is the demand for the good elastic or inelastic? _____________ As the price of flat-screen televisions decreases, the quantity demanded increases significantly. _____________ As the price of bread decreases, the quantity demanded changes only slightly. _____________ As the price of a drug used to treat heart disease increases, the quantity demanded remains unchanged.

✔ elastic, ✔ inelastic, and ✔ inelastic

The degree to which quantity demanded changes after a price change is called elasticity of demand. a substitute good. a complementary good. consumer demand.

✔ elasticity of demand.

What is the point at which supply and demand intersect? equilibrium point disequilibrium point excess supply point excess demand point

✔ equilibrium point

Choose whether each scenario demonstrates equilibrium, excess supply, or excess demand. __________________ The price of a product has dropped greatly, and store owners do not have enough of the item to meet demand. __________________ Demand for a new truck is beginning to increase, but car dealerships still have too many of these trucks on their lots. __________________ The price for a popular holiday toy has risen too high, and consumers are not purchasing items in stock in stores.

✔ excess demand, ✔ excess supply, and ✔ excess supply

A possible result of disequilibrium is excess demand. lower demand. fixed prices. stable availability.

✔ excess demand.

"A" represents the new quantity demanded, while "B" represents the new quantity supplied. What is the result of these changes? Based on this graph, what will prices most likely do?

✔ excess supply and ✔ fall

One factor that influences demand is a consumer's ability to buy a good. What is required for a consumer to have the ability to purchase a good? desire income preference taste

✔ income

According to the law of demand, as prices decrease, the quantity demanded decreases. increases. stays the same. disappears.

✔ increases.

Refer to the chart, and then use the drop-down menu to complete each statement. As the price of jeans rises, the quantity supplied _________________. When the price per pair is $50, the quantity supplied is ____. As the price increases from $20 to $60, the quantity supplied increases by ____.

✔ is increasing, ✔ 40, and ✔ 40

All things being equal, when producers sell goods for a lower price, they make more money. the same amount of money. less money. as much money as the law allows.

✔ less money.

Which best describes a reason that consumer demand can change? loss of income loss of supply distribution problems market problems

✔ loss of income

In order to compete successfully, a producer must produce goods that are more expensive than those of competitors. of a lesser quality than those of competitors. of a higher quality than those of competitors. created without worrying about the costs of production.

✔ of a higher quality than those of competitors.

A factor that most influences changes in consumer demand is quantity. price. quality. competition.

✔ price.

Both a demand curve and a demand schedule show how prices affect consumer demand. consumer demand affects income. prices affect complementary goods. consumer demand affects substitute goods.

✔ prices affect consumer demand.

A demand curve shows how changes in consumer demand affects income. prices affect the consumer demand. prices affect complementary goods. consumer demand affects substitute goods.

✔ prices affect the consumer demand.

Excess supply is created when price or _______________ move away from the equilibrium point.

✔ quantity

A supply schedule shows how prices affect the quality of a good. overall economy of a country. quantity of a good supplied by a producer. unemployment rate.

✔ quantity of a good supplied by a producer.

Products whose demand rises when another product's price increases are called substitute goods. complementary goods. elastic goods. clearance goods.

✔ substitute goods.

The amount of a good or service available in a market at a given price is known as __________.

✔ supply

The graph shows demand. In order to achieve equilibrium, what else must be included on the graph? disequilibrium supply curve excess supply excess demand

✔ supply curve

The law of supply demonstrates the behaviors of producers when they change their company's name. decide to hire fewer workers. supply goods to consumers. launch a new marketing campaign.

✔ supply goods to consumers.

Which factors must a producer consider when deciding what good to supply? Check all that apply. the appeal of the good to family members the elasticity of a good being supplied competition within the market the ability to produce the good efficiently the ability to produce a good of low quality

✔ the elasticity of a good being supplied, ✔ competition within the market, and ✔ the ability to produce the good efficiently

When prices for homes rise, why might construction companies decide to build more homes? to increase employment to make a profit to create a need for more resources to boost name recognition

✔ to make a profit

Supply and demand coordinate to determine prices by working together. competitively. with other factors. separately.

✔ together.