Microeconomics (Chapt 3)
Refer to the diagram. The highest price that buyers will be willing and able to pay for 100 units of this product is
$60
A normal good is one
for which the consumption varies directly with income
A market is in equilibrium
if the amount producers want to sell is equal to the amount consumers want buy
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
Other things equal, if the price of a key resource used to produce product X falls, the
supply curve of product X will shift to the right
When the price of a product rises, consumers with a given money income rises and thus permits consumers to purchase more of the product. This statement describes
the substitution effect
At the equilibrium price,
there are no pressures on price to either rise or fall
If there is a surplus of a product, its price
is above the equilibrium level
Refer to the diagram. The equilibrium price and quantity in this market will be
$1.00 and 200
Refer to the diagram, A surplus of 160 units would be encountered if the price was
$1.60
Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity?
an increase in supply
A recent study found that an increase in the federal tax on beer (which would increase the price of beer) would reduce the demand for marijuana. Based on this information we can conclude that
beer and marijuana are complementary goods
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
At the current price, there is a shortage of a product. We would expect price to
increase, quantity demanded to decrease, and quantity supplied to increase
College students living off-campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start careers, their consumption of both goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are
inferior goods
Refer to the diagram. A decrease in quantity demanded is depicted by a
move from point y to point x
The law of supply indicates that, other things equal,
producers will offer more of a product at high prices than at low prices
The term "quantity demanded"
refers to the amount of a product that will be purchased at some specific price
Refer to the diagram. A decrease in demand is depicted by a
shift from D2 to D1
Refer to the diagram. A decrease in supply is depicted by a
shift from S2 to S1
An improvement in production technology will
shift the supply curve to the right
Refer to the diagram. A price of $20 in this market will result in a
shortage of 100 units
In 2007, the price of oil increased, which in turn caused the price of natural gas to rise. This can best be explained by saying that oil and natural gas are
substitute goods, and the higher price for oil increased the demand for natural gas
An increase in the excise tax on cigarettes raises the price of cigarettes by shifting the
supply curve for cigarettes leftward
Graphically, the market demand curve is
the horizontal sum of individual demand curves
When the price of a product falls, the purchasing power of our money income rises and thus permits consumers to purchase more of the product. This statement describes
the income effect
