Exon Supply and demand Chapter 3
A normal good is one:
for which the consumption varies directly with income
A price ceiling means that:
government is imposing a legal price that is typically above the equilibrium price
A price floor means that:
government is imposing a minimum legal price that is typically above the equilibrium price
When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes the:
income effect
When the price of a product rises, consumers with a given money income shift their purchases to other products whose prices and now relatively lower. This statement describes:
the substition effect
If the demand curve for product B shifts to the right as the price of product A declines, then:
A and B are complementary goods
Which of the following will cause the demand curve for product A to shift to the left?
An increase in money income if A is an inferior good
A maket is in equilibrium
If the amount of producers want to sell is equal to the amount consumers want to buy
Which of the following would most liekly increase the demand for gasoline?
The expectation by consumers that gasoline prices will be lower in the future.
In moving along a demand curve, which of the following is not held constant?
The price of the product for which the demand curve is relevant
In moving along a supply curve, which of the folowing is not held constant?
The price of the product for which the supply curve is relevant
If two goods are complements:
a decrease in the price of one will increase the demanded for the other
Which of the following would not shift the demand curve for beef?
a reduction in the price of cattle feed
A firm's supply curve is upslopping because:
beyond some point the production costs of additional units of output will rise
If X is a normal good, a rise in money income will shift the:
demand curve for X to the right
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 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
A market
is an instution that brings together buyers and sellers
The upward slope of the supply curve reflects the:
law of supply
The equilibrium price and quantity in a market usually produce allocative efficiency because
marginal benefit and marginal cost are equal at that poin
An inferior good is:
not accurately defined by any of these statements
The demand curve shows the relationship between:
price and quantity demanded
The law of demand states that, other things equal:
price and quantity demanded are inversely related
If the supply of a product decrease and the demand for that product simutaneously increases, then equilibrium
price must rise, but equilibrium quantity may rise, fall, or remain unchanged.
The law of supply indicates that, other things equal:
producers will offer more of a product at higher prices than at low prices
Allocative efficiency is concerned with:
producing the combination of goods most desired by society
An increase in product price will cause:
quantity demanded to decrease
The term "quantity demanded":
refers to the amount of a product that will be purchased at some specific price
An effective price floor on wheat will"
result in a surplus of wheat
If products C and D are close substitutes, an increase in the price of C will:
shift the demand curve of D to the right
An improvement in production technology will
shift the supply curve to the right
A leftward shift of a product supply curve might be caused by:
some firms leaving an industry
An increase in the excise tax on cigarettes raises the price of cigarettes by shifting the:
supply curve for cigarettes leftward
The income and substituion effects account for:
the downward-slopping demand curve
Graphically, the market demand curve is:
the horizontal sum of individual demand curves
At the point where the demand and supply curves for a product intersect:
the quantity that consumers want to purchase and the amount producers choose to sell are the same
At the equilibrium price:
there are no pressures on price to either rise or fall
A product market is in equilibrium:
where the demand and suppl curves intersect
Increasing marginal cost of production explains:
why the supply curve is upsloping