Unit 2: Demand, Supply & Equilibrium

Which statement about demand and supply is true?

An increase in consumer income is likely to increase the demand for a normal good.

A decrease in equilibrium price and indeterminate result on equilibrium quantity is a result of which of the following?

An increase in supply and a simultaneous decrease in demand

Which of the following is likely to cause an increase in the demand for a good or service?

An increase in the number of buyers

The willingness and ability of a consumer to buy a normal product falls because of ______.

a fall in income

The concept of demand can be summarized by a schedule or curve showing the quantity of a product that would be ______.

consumed at various possible prices

One of the determinants of demand is ______ expectations.

consumer

The price of ______ goods is a determinant of demand.

related

In general, a rise in income causes a decrease in demand for most products and a fall in income causes an increase in demand for most products, other things equal.

False

True or false: A complementary good is one that is used in place of another good.

False

True or false: If the demand for a good increases when consumer incomes rise, then the good is considered an inferior good.

False

True or false: In the supply and demand model, quantity demanded is illustrated on the vertical axis, while price is illustrated on the horizontal axis.

False

True or false: The laws of supply and demand explain how a market operates by showing the relationship between the quality of a good or service and the price people are willing to pay for that quality.

False

Which exemplifies a pair of substitute goods?

Hot dogs and hamburgers

Which of the following is a determinant of demand?

Income

Which of the following are determinants of supply?

Prices of other goods Producer expectations Taxes and subsidies

Which of the following are determinants of supply?

Resource prices Technology Taxes and subsidies

All the following are the determinants of demand except ______.

price of substitutes in production

The determinants of the supply of a good are any factors other than the product's ______ that cause the supply curve of the good to shift.

price

As a result of a simultaneous increase in supply and decrease in demand, _____.

price falls and the change in equilibrium quantity is indeterminate

Which of the following statements describe the law of demand?

-All other things being equal, as price decreases, quantity demanded increases. -All other things being equal, as price increases, quantity demanded decreases.

Which of the following statements describe the law of demand?

-All other things being equal, as price decreases, quantity demanded increases.-All other things being equal, as price increases, quantity demanded decreases.

From an economic perspective, which of the following are true of a market?

-In a market, buyers and sellers make strategic decisions to make themselves better off. -In a market, buyers and sellers interact to buy and sell goods or services -Some markets are local, whereas some markets are national or international

The demand for a normal good would likely increase in which of the following cases?

An increase in the number of buyers A decrease in the price of complementary goods

With a market failure, consumers can be harmed with a loss of , ______ surplus and/or producers can be harmed by a loss of , ___ surplus.

Blank 1: consumer Blank 2: producer

Products whose demand varies directly with changes in money income are called normal or ______ (one word) goods

Blank 1: demandor luxury

Government may place legal limits on prices when it is determined that prices are unfairly (high/low) for buyers or unfairly (high/low) for sellers.

Blank 1: high, increasing, or rising Blank 2: low, reducing, decreasing, or falling

A favorable change in consumer tastes and preferences for a product will _____ demand, shifting the demand curve to the (right/left).

Blank 1: increase or raise Blank 2: right or rightward

A normal good is an item for which demand (increases/decreases) when income rises and (increases/decreases) when income falls.

Blank 1: increases Blank 2: decreases

An e-commerce site, a gas station, a local music store, and a farmer's roadside stand are all examples of a familiar ______ . (Type only one word in the blank.)

Market

Which of the following are substitutes?

Pepsi and Coca-Cola

Which of the following are determinants of demand?

Prices of related goods Consumer income Number of buyers Consumer tastes Consumer expectations

Which of the following types of goods affect the demand for another product due to a change in their price? (Select all that apply)

Substitute goods Complementary goods

The laws, or models, of supply and demand describe the relationship between which two factors?

The price at which a good or service is bought or sold The quantity of a good or service bought or sold

True or false: An increase in the number of buyers in a market, ceteris paribus, is likely to increase demand.

True

Price controls or ______ mandated in the apartment rental market benefit the consumer by establishing a price ______ the free market equilibrium price.

ceilings; below

An unfavorable change in consumer tastes and preferences for a product will ______ demand, which is illustrated as a shift of the demand curve to the ______.

decrease; left

Change in the number of buyers is a determinant of market ____ . (Use only one word for the blank.)

demand

Consumer expectations are a determinant of

demand

The interaction between buyers and sellers determines the equilibrium price and the

equilibrium

Two causes of market failures are

externalities and public goods

True or false: For many people, Coke and Pepsi are complements.

false

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hi

When the price of Coke rises, the demand for Pepsi is likely to ______.

increase

Products that have decreased demand when consumer incomes rise and increased demand when consumer incomes fall are called ______ goods.

inferior

When two variables are being examined, and one variable moves one way and the other variable moves in the opposite direction, this is called a(n):

inverse relationship

A price ceiling is the maximum legal price a seller may charge for a product or service where a price at or below the ceiling is ______ and a price above the price ceiling is ______.

legal; illegal

The equilibrium price where the quantity demanded equals the quantity supplied is otherwise known as the________ price

market

The law of demand describes a (positive/negative) relationship between the price of a good or service and the quantity demanded of that good or service.

negative

Other things equal, as a buyer's income rises, the willingness and ability to buy a normal product increases.

tru

True or false: A substitute good is one that is used in place of another good.

tru