Economics 2.5

Which of the following would reduce the price of basketballs and increase the quantity sold?

An increase in the supply of basketballs.

Suppose demand decreases and supply decreases. Which of the following will happen?

Equilibrium price will rise, fall, or stay the same while equilibrium quantity will decrease.

Suppose demand decreases and supply increases. Which of the following will happen?

Equilibrium quantity will rise, fall, or stay the same while equilibrium price will decrease.

If price rises, what happens to the demand for a product?

It does not change

After a hurricane in Florida knocked out the regional water supply for several days, the demand for bottled water increased sharply. In a market economy, how will this increase in demand affect the equilibrium price and quantity of bottled water?

Price will increase, and quantity will increase.

Which of the following is the most likely effect of higher chicken prices on the price and quantity purchased of beef, a substitute product?

The price of beef will increase, and the quantity purchased will increase.

Other things constant, how will a decrease in the wages of teenagers affect the market for fast food hamburgers?

The supply of fast food hamburgers will increase, leading to a reduction in the price of hamburgers.

Suppose the market equilibrium price of wheat is $5 per bushel, and the government sets a price floor of $7 per bushel to aid growers. What is the most likely result of this action?

There will be a surplus of wheat.

An increase in the price of metal raises the cost of manufacturing dishwashers. As a result, the market changes to a new equilibrium because of

a leftward shift in the supply curve for dishwashers.

A law establishing a maximum legal price for a good or service is known as

a prices ceiling

When several hurricanes hit Florida in 2004, a number of local governments imposed price controls that prevented sellers from raising their prices for badly needed products like plywood and generators. In the areas where the controls were imposed, they resulted in

a reduced availability of these badly needed products.

If an increase in the government-imposed minimum wage pushes the price (wage) of unskilled labor above market equilibrium, which of the following will most likely occur in the unskilled labor market?

a surplus of unskilled labor (unemployment)

A minimum wage that is set above a market's equilibrium wage will result in

an excess supply of labor, that is, unemployment.

A price ceiling that sets the price of a good below market equilibrium will cause

an increase in quantity demanded of the good. a decrease in quantity supplied of the good. a shortage of the good. all of the above.

If we observe an increase in the price of a good and an increase in the amount of the good bought and sold, this could be explained by

an increase in the demand for the good.

Which of the following will lead to a decrease in supply of a good?

an increase in the price of an important resource used to produce the good

Which of the following would tend to increase the wage of coal miners?

an increase in the price of oil, a substitute for coal

Two goods are considered substitutes only if

an increase in the price of one leads to an increase in the demand for the other

Two goods are considered substitutes if

an increase in the price of one leads to an increase in the demand for the other.

If we observe a decrease in the price of a good and an increase in the amount of the good bought and sold, this could be explained by

an increase in the supply of the good.

Other things being equal, the effect of an increase in the price of milk would be illustrated by

an upward movement along the demand curve for milk.

The price of chicken increases as the result of higher beef prices. This indicates that

chicken and beef are substitutes.

Which of the following is necessary for the invisible hand of market prices to work properly?

competition and property rights that are well-defined and enforced

An increase in the price of a good would

decrease the quantity demanded for the good.

When economists say the demand for a product has increased, they mean the

demand curve has shifted to the right.

A legal system that provides secure private property rights and unbiased enforcement of contracts

enhances the efficiency of markets.

In a market economy, which of the following would most likely cause a prolonged grain surplus?

imposition of a price floor above the equilibrium price of grain

For a typical product, an increase in consumer income will cause the market demand for the product to

increase, which is a shift to the right of the demand curve.

Prices direct economic activity in a market economy by

influencing the actions of buyers and sellers.

Under rent control, tenants can expect

lower rent and lower quality housing.

If consumer tastes are changing more in favor of the consumption of a particular good the

market demand curve would shift to the right.

Willingness to pay

measures the value that a buyer places on a good.

The imposition of price ceilings on a market often results in

n increase in expenditures in the black market.

When a shortage of a good is present due to a price ceiling,

non-price factors, such as discrimination or waiting in line, will play a greater role in the allocation of the good.

A demand curve for flowers would show the

number of flowers that will be purchased at various prices.

When the price of a good is legally set below the equilibrium level, a shortage often results. This shortage

occurs because the price ceiling prevents the market mechanism from establishing an equilibrium price.

When there is excess demand for a product in a market,

price must be below the equilibrium price.

When economists say the quantity demanded of a product has increased, they mean the

price of the product has fallen, and consequently, consumers are buying more of it.

According to the law of supply,

producers are willing to supply larger amounts of a good as its price increases.

Economic analysis indicates minimum wage legislation has

reduced the on-the-job training opportunities available to teenagers.

If a small percentage increase in the price of a good results in a rather large percentage increase in the quantity supplied of the good, supply is said to be

relatively elastic

If a large percentage increase in the price of a good results in a small percentage reduction in the quantity demanded of the good, demand is said to be

relatively inelastic

If the price of coffee decreases, the demand curve for tea (a substitute good) will

shift to the left

Consider the market for grapes. An increase in the wage paid to grape pickers will cause the

supply curve for grapes to shift to the left, resulting in a higher equilibrium price for grapes and a decrease in the quantity consumed.

When economists say the supply of a product has increased, they mean the

supply curve has shifted to the right.

A decrease in the price of leather used to make shoes would cause the

supply of shoes to increase.

Each point on the demand curve indicates

the quantity demanded at that price.

Other things constant, as the price of a resource increases,

the quantity of the resource demanded falls.

Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because

with shortages and waiting lists, they have no incentive to maintain and improve their property.