Chapter Four: Supply and Demand
If as the price of a tank tank top decreases, the quantity of T-shirts that firms plan to sell increases, then tank tops and T-shirts are _______. A. normal goods B. substitutes in production C. inferior goods D. complements in production
B. substitutes in production
E. A severe winter in New York induces more people to vacation in Florida. F. With no snow in the Rockies, fewer people travel to the ski slopes. G. The price of train travel rises. H. The price of a pound of air cargo falls. Which of the following five statements about the market for air travel is correct? 1. Event E increases the supply of air travel. 2. Event G increases the demand for air travel. 3. Event F changes neither the supply of nor the demand for air travel. 4. Event H decreases the supply of air travel. 5. Events E, F, and G increase the supply of air travel.
2. Event G increases the demand for air travel.
Each of the following four events occurs (one at a time) in the market for air travel. A. Airfares rise, while train fares don't change. B. The price of jet fuel rises. C. Airlines boost the number of flights each day. D. People expect airfares to increase next summer. Only one of the following statements about the market for air travel is correct. Which one? 1. Event D changes neither the supply of nor the demand for air travel. 2. Events A, B, and C increase the supply of air travel. 3. Event C increases the demand for air travel and increases the supply of air travel. 4. Event B decreases the demand for air travel. 5. Event A changes neither the supply of nor the demand for air travel.
5. Event A changes neither the supply of nor the demand for air travel.
Which of the following events in the market for Caribbean cruises illustrates the law of demand? 1. The price of a Caribbean cruise rises. 2. Caribbean cruises become more popular. 3. The price of a cruise to Asia falls. 4. Celebrity Cruises launches its new "students only" Caribbean cruises. 5. Cruise companies increase the number of leading rock artists for their onboard entertainment. A. Event #1 only B. Events #2, #3, #4, and #5 C. Event #2 only D. Events #1, #3, and #4 E. All 5 events listed
A. Event #1 only
Factories that produce smartphones can also produce smart watches. Which of the following events in the market for smartphones illustrates the law of supply? 1. The price of a smart watch falls. 2. A new robot technology lowers the cost of producing smartphones. 3. The price of a smartphone falls. 4. The price of a smartphone is expected to rise next year. 5. The wage rate paid to smartphone factory workers increases. A. Event #3 only B. Events #2, #3, and #4 C. Event #1 only D. Events #1, #4, and #5 E. All 5 events listed
A. Event #3 only
Which of the following statements about the market for chicken describes a change in the quantity demanded and which describes a change in demand? I People are buying less chicken because the price of beef has fallen. II People are buying less chicken because the price of chicken has increased. III People are buying more chicken because the price of chicken has fallen. IV The cost of chicken feed has increased. A. I is a change in demand and II and III are changes in the quantity demanded. B. I is a change in the quantity demanded and II and III are changes in demand. C. I, II, and III are changes in the quantity demanded and IV is a change in demand. D. I, II, and III are changes in demand and IV is a change in the quantity demanded.
A. I is a change in demand and II and III are changes in the quantity demanded.
In the market for smartphones, which of the following events increases the supply of smartphones? A. New technology that lowers the cost of making a smartphone B. An increase in people's incomes C. A rise in the price of an e-book reader (a substitute in production) D. A rise in the wage rate paid to electronics workers
A. New technology that lowers the cost of making a smartphone
Which of the following events in the market for timber beams illustrates the law of supply? 1. The wage rate of sawmill workers rises. 2. The price of sawdust rises. 3. The price of a timber beam rises. 4. The price of a timber beam is expected to rise next year. 5. Environmentalists convince Congress to introduce a new law that reduces the amount of forest that can be cut for timber. 6. A new technology lowers the cost of producing timber beams . A. Only Event #3 B. Events #2, #3, and #4 C. Events #4, #5, and #6 D. All 6 events E. Event #1
A. Only Event #3
Consider the market for coffee. Suppose producers announce that the price of a cup of coffee will fall next week. Explain the effect of this event on the quantity of coffee demanded and on the demand for coffee. A. The demand for coffee decreases B. The quantity of coffee demanded increases and the demand for coffee also increases. C. The quantity of coffee demanded increases. D. The quantity of coffee demanded decreases. E. The demand for coffee increases.
A. The demand for coffee decreases
Which of the following statements by Tom demonstrates that his buying plans obey the law of demand? A. The only thing that's changed is the price of textbooks: they've become more expensive and now I'm not buying as many. B. At an average price of $80 per text book, I plan to buy 5 text books per semester. C. For me, a good course website is a substitute for a textbook. D. I can't afford as many textbooks because my rent has increased.
A. The only thing that's changed is the price of textbooks: they've become more expensive and now I'm not buying as many.
Stephen graduates from college and his income increases by $35,000. Nothing else changes. Stephen decreases the quantity of T-shirts and toast that he buys and increases the quantity of classical music downloads that he buys. For Stephen, _______. A. classical music downloads are normal goods B. T-shirts and classical music downloads have become substitutes C. T-shirts and toast have become complements D. classical music downloads and toast are normal goods
A. classical music downloads are normal goods
Which of the following events illustrates the law of demand: Other things remaining the same, a rise in the price of a good will ______. A. decrease the quantity demanded of that good B. increase the demand for a substitute of that good C. decrease the demand for the good D. increase the demand for a complement of that good
A. decrease the quantity demanded of that good
Suppose bread is a complement in production of wheat bran. A decrease in the price of breadbread will ______ the equilibrium price of wheat bran and ______ the equilibrium quantity of wheat bran. A. increase; decrease B. decrease; decrease C. decrease; increase D. increase; increase
A. increase; decrease
A demand schedule is a list of the ______ at each different price when all other influences on buying plans remain the same. A demand curve is a graph of _____ . A. quantities demanded; a demand schedule B. quantities actually bought; quantities demanded C. surpluses; price falls D. shortages; price rises
A. quantities demanded; a demand schedule
When floods wiped out the banana crop in Central America, the equilibrium price of bananas ______ and the equilibrium quantity of bananas ______. A. rose; decreased B. rose; increased C. fell; decreased D. fell; increased
A. rose; decreased
A decrease in the demand for chocolate with no change in the supply of chocolate will create a ______ of chocolate at today's price, but gradually the price will ______. A. surplus; fall B. surplus; rise C. shortage; rise D. shortage; fall
A. surplus; fall
If the price of a printer falls, with all other influences on buying plans remaining the same, _______. A. the quantity of printers demanded increases B. the demand for printers decreases C. the demand for printers increases D. the quantity of printers demanded decreases
A. the quantity of printers demanded increases
During 1994, Brazil experienced severe frosts, which wiped out many coffee plantations. New plantations in Brazil began to produce coffee beans in 1999. During the early 2000s, countries such as Vietnam started to produce coffee beans and coffee shops such as Starbucks started to spring up across Europe. Use these events to explain why the price rose during the late 1990s, fell during the early 2000s, and rose again after 2003. The price fell during the early 2000s because the ______. The price rose again after 2003 because the ______. A. supply of coffee increased; supply of coffee decreased B. supply of coffee increased; demand for coffee increased C. demand for coffee decreased; supply of coffee decreased D. supply of coffee increased; supply of coffee increased further E. demand for coffee decreased; demand for coffee decreased further
B. supply of coffee increased; demand for coffee increased
Aqua Springs makes the following four statements about bottled spring water. Which statement best describes thefirm's quantity supplied in the bottled water market? A. We would sell more water if the demand for it were greater. B. We'll switch from plain water to flavored water is flavored is more profitable. C. At a price of $1 gallon, we plan to sell 2,000 gallons per day. D. If we could get a higher price, we'd bottle more water.
C. At a price of $1 gallon, we plan to sell 2,000 gallons per day.
Jeb makes the following four statements about peanuts. Which statement best describes his quantity demanded in the peanut market? A. I eat peanuts to complement cola. B. I'll stop eating peanuts when I can afford to buy walnuts. C. At a price of $1 per pack, I plan to buy 2 packs of peanuts per week. D. If peanuts were less expensive, I'd buy them more often.
C. At a price of $1 per pack, I plan to buy 2 packs of peanuts per week.
Explain how each of the following events changes the demand for or supply of jeans. A. A new technology becomes available that reduces the time it takes to manufacture a pair of jeans. B. The price of the cloth (denim) used to make jeans rises. C. Jeans go out of fashion. D. The price of a pair of jeans rises. E. The wage rate paid to garment workers falls. F. Many jeans producers go out of business. G. The price of a denim skirt doubles. H. People's incomes decrease. A. Event B increases supply and event G increases demand. B. Event E increases demand and event F decreases supply. C. Event A increases supply and event B decreases supply. D. Event G decreases supply and event H decreases supply. E. Event C decreases supply and event D decreases demand.
C. Event A increases supply and event B decreases supply.
Which of the following statements describes a change in the quantity supplied and which describes a change insupply? I Farms are selling less chicken because the price of turkey has increased. II Farms are selling less chicken because the price of chicken has fallen. III Farms are selling more chicken because the price of chicken has risen. IV Farms are selling more chicken because the cost of chicken feed has fallen. A. I is a change in the quantity supplied and II, III, and IV are changes in supply. B. I, II, and III are changes in the quantity supplied and IV is a change in supply C. I and IV are changes in supply and II and III are changes in the quantity supplied. D. I, II, and III are changes in supply and IV is a change in the quantity supplied.
C. I and IV are changes in supply and II and III are changes in the quantity supplied.
Consider the U.S. market for milk. Suppose the price of a carton of milk rises. Explain the effect of this event on the quantity of milk demanded and on the demand for milk. A. The quantity of milk demanded is unchanged and the demand for milk decreases. B. The quantity of milk demanded decreases and the demand for milk also decreases C. The quantity of milk demanded decreases and the demand for milk is unchanged D. The quantity of milk demanded increases and the demand for milk is unchanged E. The quantity of milk demanded increases and the demand for milk also increases
C. The quantity of milk demanded decreases and the demand for milk is unchanged
A substitute is a good that is _____ another good, and a complement is a good that is _____ another good. A. produced in place of; sold with B. consumed together with; consumed in place of C. consumed in place of; consumed together with D. consumed in place of; produced with
C. consumed in place of; consumed together with
Consumers eating higher food costs With higher gasoline prices, the demand for ethanol has increased. Because ethanol is made from corn, the price of corn rose, which in turn increased the prices of bread and chicken in the United States. Source: USA TODAY, September 6, 2007 Explain why the demand for ethanol has influenced the price of chicken. With some of the U.S. corn crop being used to produce ethanol, the increased demand for ethanol has raised the price of chicken because _______. A. the decrease in the demand for chicken is less than the decrease in the supply of chicken B. people have substituted chicken for other foods, which has increased the demand for chicken C. corn is used in the production of chicken and the higher price of corn has decreased the supply of chicken D. the cost of producing chicken has increased, which decreases the quantity of chicken supplied
C. corn is used in the production of chicken and the higher price of corn has decreased the supply of chicken
For consumers, golf clubs and golf lessons are complements. If the price of a golf club decreases, the demand for golf lessons will _______. A. decrease, and the demand curve for golf lessons will shift leftward B. not change, but there will be a movement along the demand curve for golf lessons C. increase, and the demand curve for golf lessons will shift rightward D. increase or decrease, but the demand for golf clubs will not change
C. increase, and the demand curve for golf lessons will shift rightward
A substitute in production is a good that is _____ another good, and a complement in production is a good that is _____ another good. A. produced together with; produced in place of B. produced in place of; consumed with C. produced in place of; produced together with D. consumed in place of; produced together with
C. produced in place of; produced together with
What is the effect on the equilibrium price and equilibrium quantity of orange juice if the price of apple juice decreases and the wage rate paid to orange grove workers increases? The equilibrium price of orange juice ______ and the equilibrium quantity ______. A. rises, falls, or remains the same; increases B. does not change; does not change C. rises, falls, or remains the same; decreases D. always rises; decreases E. always rises; increases
C. rises, falls, or remains the same; decreases
In market equilibrium, at the equilibrium price and equilibrium quantity, _____ . A. demand equals supply B. both the quantity demanded equals the quantity supplied and demand equals supply. C. the quantity demanded equals the quantity supplied and equals the quantity bought and sold D. demand is not greater than supply
C. the quantity demanded equals the quantity supplied and equals the quantity bought and sold
Labels seek end to 99cents¢ per song download The Wall Street Journal reported that five major recording companies think that song downloads at 99 cents per song are too cheap and they would like to see a price between $1.25 and $2.99 per song. Source: The Register, April 9, 2004 What would happen in the market for music downloads if the major recording companies tried to hike the price to to$2.99 a song? If, when the market price of a song was 99 cents, major recording companies hike the price to $2.99 a song, ______. A. the demand for songs increases, the supply decreases, and a shortage of songs results B. the quantity supplied decreases, the quantity demanded increases, and a surplus of songs results C. the quantity demanded decreases, the quantity supplied increases, and a surplus of songs is created D. the quantity demanded decreases, the quantity supplied increases, and a shortage of songs is created E. the demand for songs increases, the supply decreases, and a surplus of songs is created
C. the quantity demanded decreases, the quantity supplied increases, and a surplus of songs is created
Supply is _____, when all other influences on buying plans remain the same. A. the quantity of a good that producers plan to sell B. the relationship between the quantity supplied of a good and the cost of labor used to produce it C. the relationship between the quantity supplied of a good and the price of the good D. the is the quantity of a good that producers would be willing to sell if costs were lower
C. the relationship between the quantity supplied of a good and the price of the good
Which of the following statements describes the law of market forces? A. A rise in the price of cabbage creates a surplus of cabbage and a fall in the price of corn creates a shortage of corn. B. When the price of cabbage increased, nothing else changed and people bought less cabbage. C. When the price of corn fell, nothing else changed and farmers planted fewer acres with corn. D. A shortage of cabbage increased the price of cabbage and a surplus of corn lowered its price.
D. A shortage of cabbage increased the price of cabbage and a surplus of corn lowered its price.
Which of the following statements by Aqua Springs demonstrates that the firm's selling plans obey the law of supply? A. At a price of $1 gallon, we plan to sell 2,000 gallons per day. B. We can easily decrease the production of plain water and increase the production of flavored water. C. We've been hit by a rise in the price of plastic bottles and will lower production. D. If the price of bottled water falls and all the other influences on our selling plans remain the same, we will cut back on production and lay off some workers
D. If the price of bottled water falls and all the other influences on our selling plans remain the same, we will cut back on production and lay off some workers
Which of the following events in the market for smartphones illustrates the law of demand? 1. The price of a smartphone falls. 2. Producers announce that smartphone prices will fall next month. 3. The price of a call made from a smartphone falls. 4. The price of a call made from a land-line phone increases. 5.An increase in memory makes smartphones more popular. A. Events #1, #3, and #4 B. Events #2, #3, #4, and #5 C. Only Event #2 D. Only Event #1 E. All 5 events
D. Only Event #1
After heavy rain and low production, the weather improves and coffee growers enjoy bumper crops. The price of coffee _______ . A. remains the same because people will buy more coffee as more coffee becomes available B. does not change because the demand for coffee and the supply of coffee increase by the same amount C. rises because with more coffee available people drink more coffee D. falls because the supply of coffee increases and the demand for coffee remains unchanged E. might rise or fall because the supply of coffee fluctuates
D. falls because the supply of coffee increases and the demand for coffee remains unchanged
The demand for a good decreases by 10 percent and the supply of the good decreases by 8 percent. The price of the good _______ because _______. A. either rises or falls; demand decreases and supply decreases B. rises; demand decreases by more than supply decreases and when demand decreases the price rises C. falls; when demand decreases or supply decreases the price falls D. falls; demand decreases by more than supply decreases and when demand decreases the price falls E. rises; when demand decreases or supply decreases the price rises
D. falls; demand decreases by more than supply decreases and when demand decreases the price falls
During 1994, Brazil experienced severe frosts, which wiped out many coffee plantations. New plantations in Brazil began to produce coffee beans in 1999. During the early 2000s, countries such as Vietnam started to produce coffee beans and coffee shops such as Starbucks started to spring up across Europe. Use these events to explain why the price rose during the late 1990s, fell during the early 2000s, and rose again after 2003. The price rose during the late 1990s because the _______. A. the supply of coffee increased and the demand for coffee decreased B. demand for coffee increased C. demand for coffee decreased D. supply of coffee decreased E. supply of coffee increased
D. supply of coffee decreased
Demand is _____, when all other influences on buying plans remain the same. A. the is the quantity of a good that people want but can't afford B. the relationship between the quantity demanded of a good and income C. the quantity of a good that people plan to buy D. the relationship between the quantity demanded of a good and the price of the good
D. the relationship between the quantity demanded of a good and the price of the good
