Macroeconomics/ Chapter 4 Demand and Supply

A substitute for a good is

another good that can be consumed in its place.

A complement of a good is

another good that is consumed with it.

For​ consumers, computers and movie downloads are complements. If the price of a computer decreases​, the demand for movie downloads will​ _______. A. increase or​ decrease, but the demand for computers will not change B. increase​, and the demand curve for movie downloads will shift rightward C. decrease​, and the demand curve for movie downloads will shift leftward D. not​ change, but there will be a movement along the demand curve for

B. increase​, and the demand curve for movie downloads will shift rightward

If as the price of a cake decreases​, the quantity of bread that firms plan to sell increases​, then cakes and bread are​ _______. A. inferior goods B. substitutes in production C. normal goods D. complements in production

B. substitutes in production

If we observed a rise in the price of running shoes and a decrease in the quantity of running shoes that producers​ sell, the most likely explanation would be that​ _______. A. firms should produce less running shoes B. the law of supply applies to running shoes​, but some other influence on selling plans has also changed and the supply of running shoes has decreased C. it is unprofitable to produce running shoes

B. the law of supply applies to running shoes​, but some other influence on selling plans has also changed and the supply of running shoes has decreased

Aqua Springs makes the following four statements about bottled spring water. Which statement best describes the​ firm's quantity supplied in the bottled water​ market? A. ​We'll switch from plain water to flavored water is flavored is more profitable. B. 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. D. We would sell more water if the demand for it were greater.

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'll stop eating peanuts when I can afford to buy walnuts. B. 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. D. I eat peanuts to complement cola.

C. At a price of​ $1 per​ pack, I plan to buy 2 packs of peanuts per week.

Which of the following statements by Tom demonstrates that his buying plans obey the law of demand​? A. I​ can't afford as many textbooks because my rent has increased. B. At an average price of​ $80 per text​ book, I plan to buy 5 text books per semester. C. The only thing​ that's changed is the price of​ textbooks: they've become more expensive and now​ I'm not buying as many. D. For​ me, a good course website is a substitute for a textbook.

C. The only thing​ that's changed is the price of​ textbooks: they've become more expensive and now​ I'm not buying as many.

Rising wages pose dilemma for China Chinese​ private-sector wages rose 14 percent in 2012. This trend in rapidly rising wage rates might hurt its manufacturing dominance. ​Source: Wall Street Journal​, May​ 17, 2013 Explain the effect of the rising wage rates on the supply of manufactured goods. Rising wage rates​ ________ . A. increase the cost of production​ and, with no change in​ productivity, China's supply of manufactured goods will increase B. increase both the supply of and demand for​ China's manufactured goods and will have no effect on​ China's dominance C. increase the cost of production​ and, with no change in​ productivity, China's supply of manufactured goods will decrease D. increase both productivity and the cost of production and will not influence​ China's supply of manufactured goods E. decrease the demand for​ China's manufactured goods and hurt​ China's dominance

C. increase the cost of production​ and, with no change in​ productivity, China's supply of manufactured goods will decrease

If the price of a laptop rises​, with all other influences on buying plans remaining the​ same, _______. A. the demand for laptops decreases B. the demand for laptops increases C. the quantity of laptops demanded decreases D. the quantity of laptops demanded

C. the quantity of laptops demanded decreases

A _______________ is one with many buyers and sellers: No one buyer or seller is able to set the market price.

competitive market

Demand is​ _____, when all other influences on buying plans remain the same. A. the quantity of a good that people plan to buy B. the is the quantity of a good that people want but​ can't afford C. 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 income

C. the relationship between the quantity demanded of a good and the price of the good

Mildred and Robert are the only buyers in the market for DVDs. Mildred buys 10 DVDs when the price of a DVD is ​$7.00​, 9 DVDs when the price of a DVD is ​$9.00​, and 6 DVDs a month when the price of a DVD is ​$15.00. Robert buys 22 DVDs a month when the price of a DVD is ​$7.00​, 10 DVDs when the price of a DVD is ​$9.00​, and zero DVDs when the price of a DVD is ​$15.00. In the market for​ DVDs, the quantity demanded​ _______. A. increases as the price rises B. at ​$7.00 a DVD is less than the quantity demanded at ​$9.00 a DVD C. at ​$9.00 a DVD is 9 DVDs a month D. increases as the price falls E. at ​$9.00 a DVD is 10 DVDs a month

D. increases as the price falls

Miles graduates from college and his income increases by ​$40,000. Nothing else changes. Miles decreases the quantity of ketchup and toast that he buys and increases the quantity of hot caramel apple cider that he buys. For Miles​, ​_______. A. ketchup and toast have become complements B. hot caramel apple cider and toast have become substitutes C. ketchup and hot caramel apple cider have become substitutes D. ketchup and toast are inferior goods

D. ketchup and toast are inferior goods

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. ​surpluses; price falls B. quantities actually​ bought; quantities demanded C. ​shortages; price rises D. quantities​ demanded; a demand schedule

D. quantities​ demanded; a demand schedule

Airplanes are more crowded than ever and fares are at a​ five-year high. ​Source: USA Today​, January​ 27, 2015 Does this news clip imply that the law of demand​ doesn't work in the real​ world? Explain why or why not. The news clip implies that the law of demand​ ______ work in the real world because​ ______. A. does​ not; economic models do not necessarily accurately predict events in the real world B. does​ not; as the price of an airline ticket rises the quantity demanded of airline tickets decreases C. does​ not; as the price of an airline ticket rises the quantity demanded of airline tickets increases D. ​does; "other things have not remained the​ same" as some event must have increased the demand for airline travel E. ​does; "other things have not remained the​ same" as some event decreased the demand for airline travel

D. ​does; "other things have not remained the​ same" as some event must have increased the demand for airline travel

Suppose that the price of a carton of skim milk is expected to fall next month. Explain the effect of this event on the quantity of skim milk supplied and on the supply of skim milk. A. The quantity of skim milk supplied increases. B. The supply of skim milk decreases. C. The quantity of skim milk supplied decreases and the supply of skim milk also decreases. D. The quantity of skim milk supplied decreases. E. The supply of skim milk increases.

E. The supply of skim milk increases.

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.

Only event #3.

The main influences on buying plans that change demand are

Prices of related goods Expected future prices Income Expected future income and credit Number of buyers Preferences

What is the law of supply?

Seller, on the supply side of the market, like a high price and the higher the price, the greater is quantity they plan to sell.

The law of market forces states

When there is a surplus, the price falls; and when there is a shortage, the price rises.

Demand is illustrated by

a demand schedule and a demand curve.

demand curve

a graph of the relationship between the price of a good and the quantity demanded

Competitive markets:

a market is any arrangement that brings buyers and sellers together.

change in demand

a shift of the demand curve, which changes the quantity demanded at any given price

At the_____________ , the quantity demanded equals the quantity supplied.

equilibrium price

The _____________________ is the quantity bought and sold at the equilibrium price.

equilibrium quantity

A surplus is the amount by which the quantity supplied__________.

exceeds the quantity demanded.

A rise in income brings an increase _________ and ________ brings a decrease in demand for a normal good

in demand; a fall in income

A rise in income brings a decrease in demand and a fall in income brings an increase in demand for an __________.

inferior good

demand

is the relationship between the quantity demanded and the price of a good when all other influences on buying plans remain the same.

A market has two sides:

on the demand side: buyers on the supply side: sellers

A market might be a

physical place or agroup of buyers and sellers spread arount the world who never meet.

Law of Demand

the effect of price on buying plans

Buyers, on the demand side of a market, like a low price and the lower the price, the greater is the quantity they plan to buy defines______.

the law of demand

A demand schedule is a list of

the quantities demanded at each different price when all the other influences on buying plans remain the same.

Market equilibrium occurs when _____________________________—when buyers' and sellers' plans are in balance.

the quantity demanded equals the quantity supplied

Market demand is

the sum of the demands of all the buyers in a market. +all the individuals