Economics Chapter 3
True or False Suppose A and B are complementary goods. Other things being equal, the demand curve for A will shift to the right when the price of B goes up.
False
True or False: If input prices increase, the supply curve for cheese will shift to the right.
False
True or False: Suppose A and B are substitute goods. Other things being equal, the demand curve for A will shift to the right when the price of B goes down
False
True or false: Other things being equal, an increase in the price of aspirin will decrease the demand for asprin
False
Why do supply curves have a positive slope?
Only at a higher price will it be profitable for sellers to incur the higher opportunity cost associated with supplying a larger quantity.
True or False: If a vacation in Paris is a normal good, other things being equal, an increase in consumer income will increase the demand for travel to Paris
True
True or False: According to the law of demand, if the price of a good increases, other things being equal, the quantity demanded will decrease
True
True or False: If pork and beans is an inferior good, other things being equal, an increase in consumer income will decrease the demand for pork and beans
True
Assume Congress passes a new tax of $2.00 per pack on cigarettes. The effect on the supply curve is a (an): a. decrease in supply. b. increase in supply. c. decrease in quantity supplied. d. increase in quantity supplied.
a
Other things being equal, the effects of an increase in the price of computers would best be represented by which of the following? a. A movement up along the demand curve for computers. b. A movement down along the demand curve for computers. c. A leftward shift in the demand curve for computers. d. A rightward shift in the demand curve for computers.
a
Why do demand curves have a negative slope?
at a higher price buyers will buy fewer units, and at a lower price they will buy more units
Where is the equilibrium price?
at the price where the quantity demanded and the quantity supplied are equal
Assume that Coca-Cola and Pepsi-Cola are substitutes. A rise in the price of Coca-Cola will have which of the following effects on the market for Pepsi? a. A movement down along the Pepsi demand curve. b. A rightward shift in the Pepsi demand curve. c. A movement up along the Pepsi demand curve. d. A leftward shift in the Pepsi demand curve.
b
Assume that crackers and soup are complementary goods. The effect on the soup market of an increase in the price of crackers (other things being equal) would best be described as a (an): a. decrease in the quantity of soup demanded. b. decrease in the demand for soup. c. increase in the quantity of soup demanded. d. increase in the demand for soup.
b
Three of the four events described below might reasonably be expected to shift the demand curve for beef to a new position. One would not shift the demand curve. The single exception is a (an): a. change in people's tastes with respect to beef. b. increase in the money income of beef consumers. c. fall in the price of beef. d. widespread advertising campaign undertaken by the producers of a product competitive with beef (e.g., pork).
b
Which of the following best represents the effects of a decrease in the price of tomato juice, other things being equal? a. An upward movement along the demand curve for tomato juice. b. A downward movement along the demand curve for tomato juice. c. A rightward shift in the demand curve for tomato juice. d. A leftward shift in the demand curve for tomato juice.
b
Yesterday Seller A supplied 400 units of a good X at $10 per unit. Today Seller A supplies the same quantity of units at $5 per unit. Based on this evidence, Seller A has experienced a (an): a. decrease in supply. b. increase in supply. c. increase in the quantity supplied. d. decrease in the quantity supplied. e. increase in demand.
b
Assume that both oranges and peaches can be grown on the same type of land. A decrease in the price of peaches, other things being equal, will cause a (an): a. upward movement along the supply curve for oranges. b. downward movement along the supply curve for oranges. c. rightward shift of the supply curve for oranges. d. leftward shift of the supply curve for oranges.
c
Assuming that wheat and corn can both be grown on the same type of land, a decrease in the price of corn, other factors held constant, will cause a (an): a. downward movement along the supply curve for wheat. b. upward movement along the supply curve for wheat. c. rightward shift in the supply curve for wheat. d. leftward shift in the supply curve for wheat.
c
The theory of supply states that: a. there is a negative relationship between the price of a good and the quantity of it purchased by suppliers. b. there is a positive relationship between the price of a good and the quantity that buyers choose to purchase. c. there is a positive relationship between the price of a good and the quantity of it offered for sale by suppliers. d. at a lower price, a greater quantity will be supplied.
c
When the price of a good in a market is above equilibrium: a. the quantity supplied exceeds the quantity demanded. b. a surplus of a good. c. the price will fall in the near future. d. All of the answers above are correct.
c
Which of the following is true for the law of demand? a. Sellers increase the quantity of a good available as the price of the good increases. b. An increase in price results from false needs. c. There is an inverse relationship between the price of a good and the quantity of the good demanded. d. Prices increase as more units of a product are demanded.
c
all else remains the same
ceteris paribus
A movement along a stationary demand curve caused by a change in price is called a
change in quantity demanded
a movement between points along a stationary demand curve, ceteris paribus
change in quantity demanded
a movement between points along a stationary supply curve, ceteris paribus
change in quantity supplied
an increase or a decrease in the quantity supplied at each possible price
change in supply
A movement along a stationary supply curve in response to a change in price is called a
change in the quantity supplied
A ________ is one that is jointly consumed with another good. As a result, there is an inverse relationship between a price change for one good and the demand for its "go together" good.
complementary good
a good that is jointly consumed with another good. As a result, there is an inverse relationship between a price change for one good and the demand for its "go together" good
complementary good
good that are jointly consumed with another good
complementary goods
the value between the price consumer are willing to pay for a product on the demand curve and the price actually paid for it
consumer surplus
A demand curve for The Steel Porcupines concert tickets would show the: a. quality of service that customers demand when they buy a ticket. b. number of people who like to attend the concert. c. number of tickets the promoters are willing to sell at each price. d. number of concert tickets that will be purchased at each price.
d
Assume that a computer is a normal good. An increase in consumer income, other things being equal, would: a. cause an upward movement along the demand curve for computers. b. cause a downward movement along the demand curve for computers. c. shift the demand curve for computers to the left. d. shift the demand curve for computers to the right.
d
Assume that brand X is an inferior good and name brand Y is a normal good. An increase in consumer income, other things being equal, will cause a (an): a. upward movement along the demand curve for name brand Y. b. downward movement along the demand curve for brand X. c. rightward shift in the demand curve for brand X. d. leftward shift in the demand curve for brand X.
d
Market equilibrium is defined as: a. the condition in which there is neither a shortage or surplus. b. the condition under which the separately formulated plans of buyers and sellers exactly mesh when tested in the market. c. represented graphically by the intersection of the supply and demand curves. d. All of the answers above are correct.
d
Supply curves slope upward because: a. the quality is assumed to vary with price. b. technology improves over time, increasing the ability of firms to produce more at each possible price. c. increases in the price of a good lead to rightward shifts of the supply curve. d. rising prices provide producers with higher profit incentives needed to increase the quantity supplied.
d
The "ceteris paribus" clause in the law of demand does not allow which of the following factors to change? a. Consumer tastes and preferences. b. The prices of other goods. c. Expectations. d. All of the answers above are correct.
d
Which of the following will increase the demand for large automobiles? a. A fall in the price of small automobiles b. A rise in insurance rates for large automobiles c. A fall in the price of large automobiles d. An increase in buyers' incomes (assuming large automobiles to be a normal good)
d
Which of the following will not cause a movement along the supply curve? a. Changes in the sellers' expectations. b. Increases in taxes per unit of output. c. Advances in technology. d. All of the answers above are correct.
d
the net loss of consumer and producer surplus from underproduction or overproductiton of a product
deadweight loss
When something changes other than price, there is a change in _______
demand
represents the choice making behavior of buyers
demand
a curve or schedule showing the various quantities of product consumers are willing to purchase at possible prices during a specified period of time, ceteris paribus
demand curve
depicts the relationship between price and quantity demanded
demand curve
Changes in non price determinants can produce only a shift in a _____ and not a movement along the _______
demand curve, demand curve
shows the quantities of a good or service that people are willing and able to buy at different prices
demand schedule
A normal good is any good for which there is a ______ between changes in income and its demand curve
direct relationship
A substitute good is one that competes with another good for consumer purchases. As a result, there is a _______ between a price change for one good and demand for its "competitor" good
direct relationship
The Law of Supply states there is a ________ between the price of a good and the quantity sellers are willing to offer for sale in a denied time period, ceteris paribus
direct relationship
An advance in technology results in: a. suppliers offering a larger quantity than before at each given price. b. suppliers offering the same quantity as before at a lower price. c. a rightward shift of the supply curve. d. an increase in supply. e. All of the answers above are correct.
e
There is news that the price of Tucker's Root Beer will increase significantly next week. If the demand for Tucker's Root Beer reacts only to this factor and shifts to the right, the position of this demand curve has reacted to a change in: a. tastes. b. income levels. c. the price of other goods. d. the number of buyers. e. expectations.
e
The unique price and quantity established at the intersection of the supply and demand curves is called
equilibrium
a market condition that occurs at any price and quantity at which the quantity demanded and the quantity supplied are equal
equilibrium
the price towards which the economy tends
equilibrium price
True or False: Excess quantity demanded for a good creates pressure to push the price of the good down toward the equilibrium price
false
True or false: Suppose the market price of good X is below the equilibrium price. The result is a shortage, and sellers can be expected to decrease the quantity of good X supplied
false
a rightward shift of the demand curve is called a
increase in demand
a ______ is one that there is an inverse relationship between changes in income and its demand curve
inferior good
any good for which there is an inverse relationship between changes in income and its demand curve
inferior good
An inferior good is any good for which there is an _______ relationship between the changes in income and its demand curve
inverse
A complementary good is one that is jointly consumer with another good. As a result, there is an ________ between a price change for one good and the demand for its "go together" good
inverse relationship
What does an inverse relationship between price and quantity mean?
it means that the two move in opposite directions
The _____ states that there is an inverse relationship between the price and the quantity demanded, ceteris paribus
law of demand
the principle that there is an inverse relationship between the price of a good and the quantity buyers are willing to purchase in a defined time period, ceteris paribus
law of demand
there is an inverse relationship between the price of a good and the quantity buyers are willing to purchase in a defined time period, ceteris paribus
law of demand
The principle that there is a direct relationship between the price of a good and the quantity sellers are willing to offer for sale in a defined time period, ceteris paribus is the _______
law of supply
What law states there is a direct relationship between the price of a good and the quantity sellers are willing to offer for sale in a denied time period, ceteris paribus?
law of supply
______ states that there is a direct relationship between the price and the quantity supplied, ceteris paribus
law of supply
the principle that there is a direct relationship between the price of a good and the quantity sellers are willing to offer for sale in a defined time period, ceteris paribus
law of supply
A decrease in supply is a _____ shift in the entire supply curve
leftward shift
A ______ is any arrangement in which buyers and sellers interact to determine the price and quantity of goods and services exchanged.
market
any arrangement in which buyers and sellers interact to determine the price and quantity of goods and services exchanged
market
the summation of the individual demand schedules in a market
market demand
the horizontal summation of all the quantities supplied at various prices that might prevail in the market
market supply
Demand curves have a ______ slope
negative
a ________ is one that consumers buy more of when their income increases
normal good
any good for which there is a direct relationship between changes in income and its demand curve
normal good
List the facts that can cause a demand curve to shift: a change in......
number buyers in the market, tastes and preferences, income, expectation of consumers, prices of related goods
List the factors that can cause a supply curve to shift
number of sellers in the market, technology, resource prices, taxes and subsidies, expectations of producers, prices of other goods the firm could produce
The ______ is the supply and demand mechanism which establishes equilibrium through the ability of prices to rise and fall
price system
a mechanism that uses the forces of supply and demand to create an equilibrium through rising and falling prices.
price system
a mechanism that uses the forces of supply and demand to create an equilibrium through rising and falling prices
price systen
the value of the difference between the actual selling price of a product and the price producers are willing to sell it for on the supply curve
producer surplus
When price changes, there is a change in _______
quantity demanded
An increase in supply is a _______ in the entire supply curve
rightward shift
A market condition existing at any price where the quantity is less than the quantity demanded is a ________
shortage
a market condition existing at any price at where the quantity supplied is less than the quantity demanded
shortage
What is a demand schedule
shows the quantities of a good or service that people are willing and able to buy at different prices
a ______ is one that competes with another good for consumer purchases. As a result, there is a direct relationship between a price change for one good and the demand for its "competitor" good
substitute good
a good that competes with another good for consumer purchases. As a result, there is an inverse relationship between a price change for one good and the demand for its "competitor" good
substitute good
goods that compete with one another for consumer purchases
substitute goods
______ represents the choice making behavior of sellers
supply
a curve or schedule showing the various quantities of a product sellers are willing to produce and offer for sale at possible prices during a specified period of time, ceteris paribus
supply curve
When the price of a good is greater than the equilibrium price, there is an excess quantity supplied called a
surplus
a market condition existing at any price where the quantity supplied is greater than the quantity demanded
surplus
When price changes, what happens?
the curve does not shift - there is a change in the quantity demanded
When prices change, what happens?
the curve does not shift - there is a change in the quantity supplied.
What happens when the price decreases for a good that has a substitute?
the demand curve for the substitute good decreases
What happens when the price increases for a good that has a complement?
the demand curve for the substitute good decreases
What happens when the price decreases for a good that has a complement
the demand curve for the substitute good increases
What happens when the price increases for a good that has a substitute?
the demand curve for the substitute increases
The law of supply states there is a direct relationship between ____________ and the ______________, ceteris paribus
the price of a good, quantity sellers are willing to offer for sale in a denied time period
What does a direct relationship between price and quantity mean>
the two move in the same direction
When something changes other than price, what happens?
the whole curve shifts, there is a change in demand
When something changes other than price, what happens?
the whole curve shifts- there is a change in supply
True or False: If people buy more of a generic brand when consumer income falls, it is an inferior good
true