Economics Chapter 3
A shift to the right in the demand curve for product A can be most reasonably explained by saying that:
consumer preferences have changed in favor of A so that they now want to buy more at each possible price
A market is in equilibrium
if the amount producers want to sell is equal to the amount consumers want to buy
The upward slope of the supply curve reflects the
law of supply
The law of demand states that, other things equal:
price and quantity demanded are inversely related.
An improvement in production technology will
shift the supply curve to the right
When the price of Nike soccer balls fell, Ronaldo purchased more Nike soccer balls and fewer Adidas soccer balls. Which of the following best explains Ronaldo's decision to buy more Nike soccer balls?
The substitution effect.
If two goods are complements:
a decrease in the price of one will increase the demand for the other.
Economic profits and losses:
are essential to the reallocation of resources from less desired to more desired goods.
With a downsloping demand curve and an upsloping supply curve for a product, a decrease in resource prices will:
decrease equilibrium price and increase equilibrium quantity
Suppose an excise tax is imposed on product X. We expect this tax to
decrease the demand for complementary good Y and increase the demand for substitute product Z
If Z is an inferior good, an increase in money income will shift the
demand curve for Z to the left
The relationship between quantity supplied and price is _______ and the relationship between quantity demanded and price is ________
direct; inverse
If a competitive industry is neither expanding nor contracting, we would expect:
economic profits to be zero.
With a downsloping demand curve and an upsloping supply curve for a product, an increase in consumer income will
increase equilibrium price and quantity if the product is a normal good
If the demand and supply curves for product X are stable, a government-mandated increase in the price of X will
increase the quantity supplied of X and decrease the quantity demanded of X
If the supply and demand curves for a product both decrease, then equilibrium
quantity must decline, but equilibrium price may rise, fall, or remain unchanged
An increase in the excise tax on cigarettes raises the price of cigarettes by shifting the
supply curve for cigarettes leftward
If price is above the equilibrium level, competition among sellers to reduce the resulting
surplus will increase quantity demanded and decrease quantity supplied
The income and substitution effects account for:
the downward-sloping demand curve
