Deck 3: Demand and Supply

Question 1

The price of a bag of corn chips is $3, and the price of a bottle of soda is $1. What is the relative price of a bottle of soda?

A) $3
B) 33¢
C) 1/3 bag of corn chips
D) 3 bags of corn chips

Answer 1

C

Question 2

The price of a DVD rental is currently $2.50 and the price of a Blu- ray rental is $4.00. If the price of a DVD rental falls by $0.50, the relative price a Blu- ray rental

A) rises.
B) does not change.
C) falls.
D) might change but more information is needed.

Answer 2

A

Question 3

The opportunity cost of good A in terms of good B is equal to the

A) money price of good A minus the money price of good B.
B) ratio of the money price of good A to the money price of good B.
C) money price of good B minus the money price of good A.
D) ratio of the money price of good B to the money price of good A.

Answer 3

B

Question 4

If the price of a candy bar is $1 and the price of a fast food meal is $5, then the

A) relative price of a candy bar is 5 fast food meals.
B) relative price of a fast food meal is 5 candy bars.
C) money price of a fast food meal is 1/5 of a candy bar.
D) money price of a candy bar is 1/5 of a fast food meal.

Question 5

Twenty years ago a stove cost $300 and a refrigerator cost $1,500. Today a stove costs $600, while a refrigerator costs $1,800. Which of the following statements is true?

A) The relative price of stoves and refrigerators has not changed.
B) The relative price of a refrigerator has increased.
C) The money price of a refrigerator has fallen.
D) The relative price of a stove has increased.

Question 6

If the money price of wheat increases and no other prices change, the

A) opportunity cost of wheat rises.
B) relative price of wheat falls.
C) relative price of wheat is unaffected.
D) demand for wheat increases.

Question 7

The ABC Music club charges a price of $8 for a cassette and $16 for a CD. For an ABC Music Club member, the opportunity cost of a CD is

A) 1/2 a cassette.
B) 2 cassettes plus $16.
C) 2 cassettes.
D) None of the above answers is correct.

Question 8

All of the following statements are true EXCEPT:

A) A relative price is an opportunity cost.
B) The relative price of a good can be calculated by multiplying its money price by a price index.
C) Relative prices are determined in markets.
D) The theory of demand and supply is concerned with adjustments in relative prices.

Question 9

Joe pays $8,000.00 in tuition. The 8,000 dollar tuition Joe pays is an example of what economists call

A) a money price.
B) an opportunity price.
C) a relative price.
D) an indexed price.

Question 10

Suppose the price of a football is $20.00 and the price of a basketball is $10.00. The of a football is _.

A) opportunity cost; $20.00
B) opportunity cost; $10.00
C) relative price; 1/2 basketball
D) relative price; 2 basketballs

Question 11

The price of a bag of corn chips is $3, and the price of a bottle of soda is $1. What is the relative price of a bag of corn chips?

A) 33¢
B) 3 bottles of soda
C) 1/3 bottle of soda
D) $3

Question 12

A relative price is the

A) difference between one money price and another.
B) ratio of one money price to another.
C) slope of the supply curve.
D) slope of the demand curve.

Question 13

A relative price is

A) also called the money price.
B) the ratio of one price to another price.
C) not an opportunity cost.
D) the number of dollars that must be given up in exchange for the good.

Question 14

If the price of a hot dog is $2 and the price of a hamburger is $4, then the

A) relative price of a hamburger is 1/2 of a hot dog.
B) money price of a hamburger is 2 hot dogs.
C) money price of a hot dog is 2 hamburgers.
D) relative price of a hot dog is 1/2 of a hamburger.

Question 15

The money price of a pizza is $12 per pizza and the money price of a taco is $2 per taco. The relative price of a pizza is

A) 6 tacos per pizza.
B) $24 per pizza.
C) 1/6 pizza.
D) $12 per pizza.

Question 16

The relative price of a good is

A) equal to the money price of a good.
B) what you get paid for babysitting your cousin.
C) equal to the price of that good divided by the quantity demanded of the good.
D) an opportunity cost.

Question 17

The price of a film camera is $150 and the price of a similar digital camera is $300. What is the relative price of the digital camera?

A) $150 more expensive than the film camera
B) 2 film cameras
C) 1/2 of a film camera
D) $150

Question 18

The price of a DVD rental is currently $1.50 and the price of a Blu- ray rental is $2.50. If the price of a DVD rental increases by $0.50, the relative price a Blu- ray rental

A) rises.
B) does not change.
C) falls.
D) might change but more information is needed.

Question 19

The opportunity cost of a good is the same as its

A) relative price.
B) money price.
C) price index.
D) none of the above

Question 20

The opportunity cost of a hot dog in terms of hamburgers is the

A) ratio of the slope of the demand curve for hot dogs to the slope of the demand curve for hamburgers.
B) ratio of the money price of a hot dog to the money price of a hamburger.
C) money price of a hot dog minus the money price of a hamburger.
D) ratio of the slope of the supply curve for hot dogs to the slope of the supply curve for hamburgers.

Question 21

The law of demand states that

A) a decrease in the price of a good shifts the demand curve leftward.
B) an increase in the price of a good shifts the demand curve leftward.
C) other thing remaining the same, the higher the price of a good, the larger is the quantity demanded.
D) other things remaining the same, the higher the price of a good, the smaller is the quantity demanded.

Question 22

Demands differ from wants because

A) wants require a plan to acquire a good but demands require no such plan.
B) demands reflect a decision about which wants to satisfy and a plan to buy the good, while wants are unlimited and involve no specific plan to acquire the good.
C) demands are unlimited, whereas wants are limited by income.
D) wants imply a decision about which demands to satisfy, while demands involve no specific plan to acquire the good.

Question 23

The "law of demand" predicts that, other things being equal,

A) a decrease in the price of gasoline decreases the quantity of gasoline demanded.
B) an increase in the price of pizza decreases the quantity of pizza demanded.
C) an increase in the price of CDs decreases the demand for CDs.
D) an increase in the price of coffee decreases the quantity of tea demanded.

Question 24

The "law of demand" states that, other thing remaining the same, the higher

A) consumers' incomes, the greater is the demand.
B) the price of a good, the higher is the quantity demanded.
C) the price of a good, the lower is the demand for this good.
D) the price of a good, the smaller is the quantity demanded.

Question 25

The "law of demand" refers to the fact that, all other things remaining the same, when the price of a good rises

A) the demand curve shifts rightward.
B) there is a movement up along the demand curve to a smaller quantity demanded.
C) the demand curve shifts leftward.
D) there is a movement down along the demand curve to a larger quantity demanded.

Question 26

When graphing a demand curve for corn, we are showing the relationship between the quantity demanded of corn and the

A) substitution effect.
B) relative price of corn.
C) money price of corn.
D) income effect.

Question 27

The "law of demand" states that changes in

A) the quantity demanded of a good are not related to changes in the quantity supplied.
B) demand are inversely related to changes in supply.
C) the quantity demanded of a good are inversely related to changes in its price.
D) demand are related directly to changes in supply.

Question 28

The law of demand implies that, other things remaining the same,

A) as the price of a cheeseburger rises, the quantity of cheeseburgers demanded will increase.
B) as the demand for cheeseburgers increases, the price of a cheeseburger will fall.
C) as the price of a cheeseburger rises, the quantity of cheeseburgers demanded will decrease.
D) as income increases, the quantity of cheeseburgers demanded will increase.

Question 29

Wants, as opposed to demands,

A) are the goods the consumer plans to acquire.
B) are the goods the consumer has acquired.
C) are the unlimited desires of the consumer
D) depend on the price.

Question 30

An ice cream cone costs $1.50. A can of soda costs $0.75. The relative price of an ice cream cone is

A) $1.50, the opportunity cost of a can of soda.
B) $0.75, the opportunity cost of a can of soda.
C) 1/2 can of soda, the opportunity cost of an ice cream cone.
D) 2 cans of soda, the opportunity cost of an ice cream cone.

Question 31

The "law of demand" is illustrated by a

A) movement along the demand curve.
B) rightward shift of the demand curve.
C) leftward shift of the demand curve.
D) Both answers A and B are correct.

Question 32

The law of demand implies that demand curves

A) slope down.
B) shift rightward whenever the price rises.
C) shift leftward whenever the price rises.
D) slope up.

Question 33

The quantity demanded is

A) independent of consumers' buying plans.
B) independent of the price of the good.
C) the amount of a good that consumers plan to purchase at a particular price.
D) always equal to the equilibrium quantity.

Question 34

Which of the following is consistent with the law of demand?

A) An increase in the price of a DVD causes an increase in the quantity of DVDs demanded.
B) An increase in the price of a soda causes a decrease in the quantity of soda demanded.
C) A decrease in the price of juice causes no change in the quantity of juice demanded.
D) A decrease in the price of a gallon of milk causes a decrease in the quantity of milk demanded.

Question 35

The "law of demand" states that, other things remaining the same, the quantity demanded of any good is

A) positively related to its price.
B) directly related to its price.
C) directly related to the supply of the good.
D) inversely related to its price.

Question 36

The law of demand states that the quantity of a good demanded varies

A) directly with income.
B) inversely with its price.
C) inversely with the price of substitute goods.
D) directly with population.

Question 37

The law of demand states that, other things remaining the same, the higher the price of a good, the

A) larger is the quantity of the good demanded..
B) smaller is the quantity of the good demanded.
C) smaller is the demand for the good.
D) larger is the demand for the good.

Question 38

Scarcity guarantees that

A) demands will exceed wants.
B) wants will exceed demands.
C) most demands will be satisfied.
D) demands will be equal to wants.

Question 39

A relative price is

A) equal to a money price.
B) what you get paid for babysitting your cousin.
C) the ratio of one money price to another.
D) a price expressed in terms of money.

Question 40

The "law of demand" most directly means that consumers buy

A) less of a good the higher its price.
B) more of a good the higher their incomes.
C) buy less of a good the greater is its supply.
D) buy more of a good the less is its supply.

Question 41

When the price of a normal good falls, the substitution effect leads to _ in the quantity purchased and the income effect leads to in the quantity purchased.

A) an increase; a decrease
B) a decrease; an increase
C) a decrease; a decrease
D) an increase; an increase

Question 42

Pizza is a normal good. When the price of a pizza decreases from $14 to $12,

A) the quantity demanded of pizza will not change.
B) the income effect means people buy more pizza.
C) the income effect means people buy less pizza.
D) None of the above answers is correct.

Question 43

As the opportunity cost of a good falls, the substitution effect implies that people buy

A) less of that good and less of its substitutes.
B) more of that good and more of its substitutes.
C) more of that good and less of its substitutes.
D) less of that good and more of its substitutes.

Question 44

When the price of an inferior good falls, the substitution effect leads to in the quantity purchased and the income effect leads to in the quantity purchased.

A) an increase; an increase
B) a decrease; an increase
C) a decrease; a decrease
D) an increase; a decrease

Question 45

Each point on the demand curve reflects

A) the lowest- cost technology available to produce a good.
B) all the wants of a given household.
C) the highest price consumers are willing and able to pay for that particular unit of a good.
D) the highest price sellers will accept for all units they are producing.

Question 46

Which of the following explains why demand curves slope downward?

A) substitutes and complements
B) prices and income
C) resources and technology
D) substitution effect and income effect

Question 47

When the price of a pizza decreases from $14 to $12,

A) the income effect means people buy less pizza.
B) the quantity demanded of pizza will not change.
C) the income effect points out that the total purchasing power of people who buy pizza increases.
D) None of the above answers is correct.

Question 48

The price of cereal rises. As a result, people have cereal for breakfast on fewer days and eat eggs instead. This behavior is an example of

A) a decrease in the quantity supplied of cereal because of the substitution effect.
B) an increase in the quantity demanded of eggs because of the income effect.
C) an increase in the quantity supplied of eggs because of the income effect.
D) a decrease in the quantity demanded of cereal because of the substitution effect.

Question 49

The law of demand implies that if nothing else changes, there is

A) a negative relationship between the price of a good and the quantity demanded.
B) a positive relationship between the price of a good and the quantity demanded.
C) an exponential relationship between price of a good and the quantity demanded.
D) a linear relationship between price of a good and the quantity demanded.

Question 50

When the price of a pizza decreases from $12 to $10, it is definitely the case that the

A) substitution effect means people buy more pizza.
B) income effect means people buy less pizza.
C) quantity demanded of pizza will not change.
D) None of the above answers is correct.

Question 51

If the price of an apple increases,

A) its opportunity cost increases.
B) the substitution effect does not occur.
C) the income effect does not occur.
D) its opportunity cost decreases.

Question 52

Which of the following will occur in the market for soft drinks if the money price of soft drinks incre
I) The relative price of soft drinks increases.
II) The substitution effect may cause people to switch to drinking bottled water.

A) I only
B) II only
C) neither I nor II
D) both I and II

Question 53

If the price of an apple increases from 50¢ to 60¢, the quantity demanded will decrease because of

A) the substitution and income effects.
B) a change in income.
C) the substitution effect only.
D) the income effect only.

Question 54

Which of the following influences people's buying plans and does not shift the demand curve?

A) the price of the good
B) preferences
C) income
D) the prices of related goods

Question 55

The negative slope of the demand curve indicates that there is relationship between the price and the quantity demanded.

A) an inverse
B) no relationship
C) a positive
D) a direct

Question 56

In the market for magazines, the "income effect" means that

A) a decrease in the price of a substitute product like books will make magazine readers feel a little poorer than they were before.
B) an increase in the price of magazines will reduce the total purchasing power of magazine readers, making them able to afford fewer magazines.
C) magazines are usually purchased by people with higher than average incomes.
D) an increase in the price of magazines will raise the relative price of magazines to books, causing magazine readers to read more books and fewer magazines.

Question 57

The ABC Music club charges a price of $16 for a CD and $8 for a cassette. Both CDs and cassettes are normal goods. If the ABC Music club increases the price of a CD to $18, everything else remaining the same, the

A) income effect induces club members to buy fewer CDs.
B) substitution effect induces club members to buy more cassettes and fewer CDs.
C) substitution effect induces club members to buy more CDs and fewer cassettes.
D) Both answers A and B are correct.

Question 58

The "income effect" in the market for aspirin means that

A) a decrease in the price of a substitute good like acetaminophen will make aspirin takers feel a little poorer than they were before.
B) aspirin are generally taken by people with higher than average incomes.
C) an increase in the price of aspirin will cause headache sufferers to look for a lower priced remedy.
D) an increase in the price of aspirin will reduce the total purchasing power of aspirin takers, making them able to afford fewer aspirin.

Question 59

When the price of a good falls, the income effect for a normal good implies that people buy

A) less of that good because the relative price of the good has fallen.
B) more of that good because the relative price of the good has risen.
C) more of that good because they can afford to buy more of all the things they previously bought.
D) less of that good because they cannot afford to buy all the things they previously bought.

Question 60

When the price of a good falls, the income effect for an inferior good implies that people will buy

A) less of that good because they can afford to buy more of the things they previously bought.
B) more of that good because the relative price of the good has risen.
C) less of that good because the relative price of the good has fallen.
D) more of that good because they can afford to buy more of the things they previously bought.

Question 61

You observe that an increase in the price of salsa decreases the demand for tortilla chips and increases the demand for potato chips. You can conclude that

A) tortilla chips and potato chips are complements.
B) salsa and potato chips are complements.
C) salsa and tortilla chips are complements.
D) salsa and tortilla chips are substitutes.

Question 62

Suppose people buy more of good 1 when the price of good 2 falls. These goods are

A) normal.
B) complements.
C) inferior.
D) substitutes.

Question 63

What happens to the demand for DVDs if the price of a DVD player falls?

A) The demand for DVDs decreases because the price of a complement falls.
B) The demand for DVDs increases because the price of a complement falls.
C) The demand for DVDs decreases because the price of a substitute falls.
D) The demand for DVDs remains unchanged.

Question 64

A drop in the price of a DVD shifts the demand curve for prerecorded video tapes leftward. From that you know DVDs and prerecorded tapes are

A) inferior goods.
B) complements.
C) substitutes.
D) normal goods.

Question 65

Which of the following shifts the demand curve for hot dogs leftward?

A) an increase in the price of a hot dog
B) an increase in the price of a hot dog bun
C) a decrease in the price of a hot dog bun
D) an increase in the price of a hamburger

Question 66

Changes in which of the following shift the demand curve for hamburgers?

A) an increase in the number of hamburger restaurants
B) an increase in the price of the meat used to produce hamburgers
C) a fall in the price of french fries, a complement for hamburgers
D) an improvement in the productivity of hamburger- making machines

Question 67

People buy more of good 1 when the price of good 2 rises. These goods are

A) substitutes.
B) inferior goods.
C) complements.
D) normal goods.

Question 68

Which of the following pairs of goods are most likely substitutes?

A) DVDs and DVD players
B) lettuce and salad dressing
C) peanut butter and gasoline
D) cola and lemon lime soda

Question 69

Cupcakes and granola bars are substitutes in consumption. The price of a granola bar increases. As a result, the demand for

A) cupcakes will increase, that is, the demand curve will shift rightward.
B) cupcakes will decrease, that is, the demand curve will shift leftward.
C) granola bars will decrease, that is, the demand curve will shift leftward.
D) granola bars will increase, that is, the demand curve will shift rightward.

Question 70

A complement is a good

A) of lower quality than another good.
B) used in conjunction with another good.
C) of higher quality than another good.
D) used instead of another good.

Question 71

If the price of a DVD player falls, then in the market for DVDs,

A) there is a movement upward along the demand curve for DVDs.
B) there is a movement downward along the demand curve for DVDs.
C) the demand curve for DVDs shifts leftward.
D) the demand curve for DVDs shifts rightward.

Question 72

Which of the following shifts the demand curve for oranges?

A) a decrease in the price of a pound of bananas, a substitute in consumption for oranges
B) great weather that produces a bumper orange crop this year
C) disastrous weather that destroys about half of this year's orange crop
D) an increase in the price of the fuel used to transport oranges to supermarkets

Question 73

A substitute is a good

A) of higher quality than another good.
B) that is not used in place of another good.
C) that can be used in place of another good.
D) of lower quality than another good.

Question 74

If the price of product X falls and this change increases the demand for product Y, then

A) Y is an inferior good.
B) X is an inferior good.
C) X and Y are substitutes.
D) X and Y are complements.

Question 75

Sweatshirts and tee- shirts are complements in consumption and the price of a sweatshirt increases. As a result, the demand for

A) tee- shirts will decrease that is, the demand curve will shift leftward.
B) sweatshirts will decrease that is, the demand curve will shift leftward.
C) sweatshirts will increase that is, the demand curve will shift rightward.
D) tee- shirts will increase that is, the demand curve will shift rightward.

Question 76

Which of the following shifts the demand curve for DVD rentals rightward?

A) a decrease in the price of DVD rentals
B) a decrease in the price of cable TV service
C) a decrease in the price of renting video cassette (VCR) tapes
D) a decrease in the price of DVD players

Question 77

If the price of chicken falls, then in the market for beef,

A) there is a movement upward along the demand curve for beef.
B) the demand curve for beef shifts rightward.
C) the demand curve for beef shifts leftward.
D) there is a movement downward along the demand curve for beef.

Question 78

A decrease in the price of a game of bowling shifts the

A) demand curve for bowling balls rightward.
B) supply curve of bowling balls rightward.
C) demand curve for bowling balls leftward.
D) supply curve of bowling balls leftward.

Question 79

The observation that the demand curve for grape jelly shifts rightward every time the price of peanut butter falls means that grape jelly and peanut butter are

A) inferior goods.
B) normal goods.
C) substitutes.
D) complements.

Question 80

Oatmeal is an inferior good and cold cereal is a substitute for oatmeal. Raisins are a complement for oatmeal. Which of the following increases the demand for oatmeal?

A) an increase in the price of cold cereal
B) a decrease in population size
C) an increase in income
D) an increase in the price of raisins