Deck 4: Demand, Supply, and Markets.

Question 1

Miguel buys 1 pizza per week when the price is $10, and buys 2 when the price is $7. Miguel is demonstrating _____

A) demand.
B) supply.
C) the law of demand.
D) the law of supply.
E) that he likes pizza.

Answer 1

the law of demand.

Question 2

The number of dollars a person receives per period is known as _____

A) wages.
B) money income.
C) real income.
D) substitution effect of a price change.
E) income effect of a price change.

Answer 2

money income.

Question 3

According to the law of demand, as the price of a good rises, _____

A) buyers purchase more of the good because they expect prices to be even higher in the future.
B) buyers purchase less of the good because they expect prices to fall in the future.
C) buyers purchase more of the good because they expect the price of a substitute good to rise.
D) buyers purchase less of the good because their real income decreases with an increase in price.
E) buyers purchase more of the good because the higher price reflects an improvement in product quality.

Answer 3

buyers purchase less of the good because their real income decreases with an increase in price.

Question 4

Suppose you drink more tea because the price of coffee has increased. This is indicative of _____

A) a positive relation between money income and demand.
B) an inverse relation between price and quantity supplied.
C) a positive relation between price and quantity demanded.
D) the income effect of a price change.
E) the substitution effect of a price change.

Question 5

Income measured by the goods and services it can buy is known as _____

A) wages.
B) money income.
C) real income.
D) substitution effect of a price change.
E) income effect of a price change.

Question 6

Suppose a consumer can choose to consume either apples or oranges. Which of the following is likely to occur if the price of each fruit increases by 15 percent?

A) The consumer will substitute apples for oranges.
B) The income effect of the price change will be positive.
C) The substitution effect of the price change will be zero.
D) The consumer will demand more of both of the goods.
E) The consumer will substitute oranges for apples.

Question 7

The law of demand states that _____

A) price and quantity demanded are positively related, other things constant.
B) price is the only factor that influences the quantity that people are willing and able to buy.
C) quantity demanded varies inversely with price, other things constant.
D) the demand curve shifts whenever the price of a good changes, other things constant.
E) firms create a demand for a product by producing it.

Question 8

For a renter, the income effect of an increase in apartment rents will _____

A) have a greater impact than the income effect of an increase in the price of chewing gum.
B) be almost negligible because everything except price is assumed constant along a demand curve.
C) have less of an effect than the income effect of a decrease in the price of dairy products.
D) be almost negligible because housing is a necessity.
E) have a greater impact than the positive substitution effect of this price change.

Question 9

The explanation for the law of demand begins with _____

A) a small number of wants satisfied by scarce resources.
B) finite wants satisfied by infinite resources.
C) unlimited wants confronting scarce resources.
D) unlimited wants matching up with unlimited resources.
E) prices acting as signals to existing and potential suppliers.

Question 10

The income effect of a decrease in the price of potatoes, an inferior good, is a(n) _____

A) increase in the quantity demanded of onions.
B) decrease in the quantity demanded of potatoes.
C) increase in the demand for potatoes.
D) increase in the quantity demanded of potatoes.
E) decrease in the demand for onions.

Question 11

The income effect of an increase in the price of backpacks, a normal good, is a(n) _____

A) decrease in the demand for backpacks.
B) decrease in the quantity of backpacks demanded.
C) decrease in the supply of backpacks.
D) increase in the quantity of backpacks demanded.
E) increase in the quantity of backpacks supplied.

Question 12

The demand for a product is the amount of the product that _____

A) sellers are willing and able to sell at different prices.
B) buyers are willing to purchase over different time periods.
C) sellers are willing to sell at a particular price.
D) buyers are willing and able to purchase at different prices.
E) buyers are willing to consume at a constant price.

Question 13

The law of demand implies that _____

A) price and quantity demanded are positively related.
B) price and quantity demanded are inversely related.
C) price and quantity supplied are inversely related.
D) price and quantity supplied are positively related.
E) price and quantity demanded are not related.

Question 14

The income effect of a price change is likely to be the greatest for _____

A) vitamin capsules.
B) gasoline.
C) laundry.
D) chocolates.
E) college textbooks.

Question 15

The quantity of a good that consumers are willing and able to buy is best explained by _____

A) supply.
B) demand.
C) unlimited wants.
D) scarce resources.
E) markets.

Question 16

The income effect of a decrease in the price of legal services, a normal good, is a(n) _____

A) decrease in the demand for legal services.
B) decrease in the quantity demanded of legal services.
C) increase in the quantity supplied of lawyers.
D) increase in the quantity demanded of legal services.
E) increase in the supply of lawyers.

Question 17

When the price of a good falls, that good becomes cheaper compared to other goods so consumers tend to choose that good over other goods. This is best explained as _____

A) irrational behavior.
B) money income.
C) real income.
D) substitution effect of a price change.
E) income effect of a price change.

Question 18

The law of demand indicates that _____

A) when prices rise, the quantity demanded rises.
B) when prices rise, the quantity demanded falls.
C) when prices fall, the quantity supplied rises.
D) when prices fall, the quantity supplied falls.
E) when prices rise, the quantity demanded stays the same.

Question 19

The relationship between the price of a six-pack and the quantity of Pepsi demanded is called _____

A) demand.
B) supply.
C) the law of demand.
D) the law of supply.
E) the fact that consumers like Pepsi.

Question 20

The _____ for a product indicate(s) the quantity of the product consumers are both willing and able to buy at each price during a given time period, other things constant.

A) scarce resources
B) unlimited wants
C) markets
D) demand
E) supply

Question 21

The effect of a decrease in the price of personal computers on consumer demand, other things constant, is most likely to be represented by a _____

A) leftward shift of the demand curve for personal computers.
B) upward movement along the demand curve for personal computers.
C) rightward shift of the demand curve for personal computers.
D) downward movement along the demand curve for personal computers.
E) decrease in the slope of the demand curve for personal computers.

Question 22

A movement along the demand curve for a good can be attributed to a change in _____

A) the demand for the good.
B) the opportunity cost of producing the good.
C) the quantity demanded of the good.
D) the substitution effect of consuming the good.
E) the income and preference of a consumer.

Question 23

Exhibit 4.1

Refer to Exhibit 4.1 for the demand curves of baby formula. Which of the following changes is likely to happen if the price of baby formula decreases?

A) a shift of the demand curve from D₁ to D₂
B) a movement along the demand curve D₁ from point a to point b
C) a shift of the demand curve from D₂ to D₁
D) a movement along the demand curve D₂ from point d to point c
E) a movement from point b on the demand curve D₁ to point c on the demand curve D₂

Question 24

Table 4.1
$$\begin{array}{l}\text { + Table } 4.1\\\begin{array} { | l | l | l | l | } \hline \text { Cards } & \text { Don } & \text { Jon } & \text { Ron } \\\hline \$ 2 & 3 & 2 & 1 \\\hline \$ 1.50 & 4 & 5 & 3 \\\hline\end{array}\end{array}$$

-Refer to the demand schedule in Table 4.1. There are three consumers in the market for playing cards: Don, Jon, and Ron. At a price of $2 per pack, what is the total quantity demanded for playing cards?

A) 12
B) 6
C) 3
D) 2
E) 1

Question 25

If a good is inferior, an increase in income would shift the _____

A) demand curve leftward.
B) supply curve leftward.
C) supply curve rightward.
D) supply and demand curves leftward.
E) demand curve rightward.

Question 26

Which of the following is most likely to cause the demand for ice cream, a normal good, to decrease?

A) a decrease in the price of ice cream
B) a decrease in the price of milk
C) warmer weather
D) an increase in the number of consumers
E) a decrease in consumer income

Question 27

Exhibit 4.1

Refer to Exhibit 4.1 for the demand curves of baby formula. Which of the following changes is likely to happen if the price of baby formula increases?

A) a shift of the demand curve from D₁ to D₂
B) a movement along the demand curve D₁ from point a to point b
C) a shift of the demand curve from D₂ to D₁
D) a movement along the demand curve D₂ from point d to point c
E) a movement from point b on the demand curve D₁ to point c on the demand curve D₂

Question 28

A movement along the demand curve for a good can be attributed to a change in _____

A) the demand for the good.
B) the opportunity cost of producing the good.
C) the quantity demanded of the good.
D) the substitution effect of consuming the good.
E) the income and preference of a consumer.

Question 29

The demand curve for an inferior good shifts _____ when money income increases.

A) leftward
B) rightward
C) upward
D) downward
E) sideways

Question 30

Studies show that the demand curve for peas has shifted over time. Which of the following explanations would you reject first?

A) The price of string beans has changed.
B) The demand for corn has changed.
C) The demand for string beans has changed.
D) The income of consumers has changed.
E) The price of peas has changed.

Question 31

Which of the following is most likely to be an inferior good?

A) airline travel
B) restaurant meals
C) a subscription to the Wall Street Journal
D) soft drinks
E) used clothing

Question 32

Table 4.1
$$\begin{array}{l}\text { + Table } 4.1\\\begin{array} { | l | l | l | l | } \hline \text { Cards } & \text { Don } & \text { Jon } & \text { Ron } \\\hline \$ 2 & 3 & 2 & 1 \\\hline \$ 1.50 & 4 & 5 & 3 \\\hline\end{array}\end{array}$$

-Refer to the demand schedule in Table 4.1. There are three consumers in the market for playing cards: Don, Jon, and Ron. At a price of $2 per pack, the quantities demanded by each are 3 packs, 2 packs, and 1 pack, respectively. At a price of $1.50 per pack, the quantities demanded by each are 4 packs, 5 packs, and 3 packs, respectively. Which of the following is true?

A) The market demand curve for playing cards does not follow the law of demand.
B) The decrease in price causes the quantity demanded in this market to increase by 6 packs.
C) The price decrease causes Don's demand curve to shift more than Jon's and Ron's.
D) At a price of $1 per pack, the quantity demanded in this market must be 20 packs.
E) Don's behavior does not follow the law of demand.

Question 33

Which of the following is most likely to be a normal good?

A) bologna sandwiches
B) second-hand electronic appliances
C) tickets to major league baseball games
D) bus rides
E) used paperback books

Question 34

The income effect of a price change refers to the impact of a change in _____

A) the money income of consumers on the price of a good.
B) the relative price of a good on the demand for other goods.
C) the price of a good on a consumer's real income.
D) the price of a substitute good on a consumer's budget.
E) the money income of consumers on the demand for a good.

Question 35

Table 4.1
$$\begin{array}{l}\text { + Table } 4.1\\\begin{array} { | l | l | l | l | } \hline \text { Cards } & \text { Don } & \text { Jon } & \text { Ron } \\\hline \$ 2 & 3 & 2 & 1 \\\hline \$ 1.50 & 4 & 5 & 3 \\\hline\end{array}\end{array}$$

-Refer to the demand schedule in Table 4.1. There are three consumers in the market for playing cards: Don, Jon, and Ron. When the price decreases from $2 to $1.50 per pack, what is the change in total quantity demanded for playing cards?

A) Quantity demanded increases by 12.
B) Quantity demanded increases by 6.
C) Quantity demanded decreases by 12.
D) Quantity demanded decreases by 6.
E) Quantity demanded is unchanged.

Question 36

If a good is normal, an increase in consumers' income would shift the _____

A) demand curve leftward.
B) supply curve leftward.
C) supply curve rightward.
D) supply and demand curves leftward.
E) demand curve rightward.

Question 37

If the demand for personal computers increases as the result of an increase in income, _____

A) personal computers must be a normal good.
B) personal computers must be an inferior good.
C) personal computers must be a complementary good.
D) the substitutes for personal computers must be inferior goods.
E) the complements for personal computers must be inferior goods.

Question 38

Table 4.1
$$\begin{array}{l}\text { + Table } 4.1\\\begin{array} { | l | l | l | l | } \hline \text { Cards } & \text { Don } & \text { Jon } & \text { Ron } \\\hline \$ 2 & 3 & 2 & 1 \\\hline \$ 1.50 & 4 & 5 & 3 \\\hline\end{array}\end{array}$$

-Refer to the demand schedule in Table 4.1. There are three consumers in the market for playing cards: Don, Jon, and Ron. At a price of $1.50 per pack, what is the total quantity demanded for playing cards?

A) 12
B) 6
C) 3
D) 2
E) 1

Question 39

Which of the following statements about a demand curve is true?

A) The demand curve for a good will not shift when the money income of consumers increases.
B) If price increases, the demand curve will shift to the right.
C) The demand curve for a good will not shift when price changes.
D) If a supply curve shifts, thereby changing price, the demand curve will shift as well.
E) If a demand curve shifts, the supply curve will shift as well irrespective of whether price changes.

Question 40

If we say that the demand for a good has increased, we mean there has been _____

A) an upward movement along the demand curve.
B) a downward movement along the demand curve.
C) a leftward shift of the demand curve.
D) a rightward shift of the demand curve.
E) an increase in the slope of the demand curve.

Question 41

Which of the following will cause the demand curve for gasoline to shift leftward?

A) a decrease in the price of gasoline
B) an increase in the price of gasoline
C) a leftward shift of the supply curve of gasoline
D) a rightward shift of the supply curve of cars
E) an increase in the price of cars

Question 42

Jennifer expects the price of chewing gum to go up by 10 percent next week. Which of the following is the most likely result of such an expectation?

A) Jennifer's demand for chewing gum will decrease during this week.
B) Jennifer's demand for chewing gum will increase during the following week.
C) Jennifer's demand for chewing gum will increase during this week.

Question 43

Which of the following is most likely to cause a leftward shift of the demand curve for a normal good in the current period?

A) an increase in the price of the good
B) a decrease in the price of the good
C) a decrease in the price of a complementary good
D) an expectation that price will decline in the future
E) an increase in the price of a substitute good

Question 44

Which of the following will cause the demand curve for a normal good to shift to the right?

A) a decrease in income
B) an increase in the price of a complementary good
C) a decrease in the price of the good
D) an increase in the price of a substitute good
E) an expectation that the price of the good will decline in the future

Question 45

Two goods are considered substitutes only if a(n) _____

A) decrease in the demand for one good leads to a decrease in the supply of the other.
B) increase in the demand for one good leads to a decrease in the supply of the other.
C) increase in the price of one good leads to an increase in the demand for the other.
D) decrease in the price of one good leads to an increase in the demand for the other.
E) decrease in the supply of one good causes producers to switch to the production of the other.

Question 46

If Good A and Good B are complements, then a decrease in the price of Good B _____

A) increases the quantity demanded of Good A.
B) decreases the demand for Good A.
C) increases the demand for Good A.
D) decreases the quantity demanded of Good A.
E) increases the demand for Good B.

Question 47

A change in the money income of consumers will _____

A) affect the demand for housing through the income effect of a price change.
B) affect the demand for housing through the substitution effect of a price change.
C) shift the market demand curve for housing.
D) affect the quantity demanded only if housing is an inferior good.
E) have no impact on the market demand for housing.

Question 48

Which of the following is the best example of a pair of complements?

A) milk and coffee
B) coffee and tea
C) CDs and DVDs
D) hiking boots and athletic shoes
E) paperback books and hardcover books

Question 49

Sugar and honey are viewed as substitutes for each other in many recipes. If the price of sugar rises, we would expect _____

A) the demand for honey to increase.
B) the demand for honey to decrease.
C) the quantity demanded of honey to decrease.
D) the price of honey to decrease.
E) the quantity demanded of honey to increase.

Question 50

Exhibit 4.1

Refer to Exhibit 4.1 for the demand curves of baby formula. If baby formula is an inferior good, then an increase in consumer income is likely to cause which of the following changes?

A) a shift of the demand curve from D₁ to D₂
B) a movement along the demand curve D₁ from point a to point b
C) a shift of the demand curve from D₂ to D₁
D) a movement along the demand curve D₂ from point d to point c
E) a movement from point b on the demand curve D₁ to point c on the demand curve D₂

Question 51

Which of the following statements about gold jewelry and round-trip bus tickets to Miami is most likely to be correct?

A) They are both inferior goods.
B) Their demand curves have equal slope.
C) They are complements.
D) They are substitutes.
E) They are unrelated.

Question 52

If the price of vanilla ice cream increases, everything else remaining constant, it is likely that ___

A) the demand for vanilla ice cream will increase.
B) the demand for vanilla ice cream will decrease.
C) the demand for chocolate ice cream, a substitute, will increase.
D) the demand for chocolate ice cream, a substitute, will decrease.
E) the quantity demanded of vanilla ice cream will increase.

Question 53

Exhibit 4.1

Refer to Exhibit 4.1 for the demand curves of baby formula. Which of the following changes will be caused by the discovery that breast milk provides more protection against a life-threatening disease than baby formula?

A) a shift of the demand curve from D₁ to D₂
B) a movement along the demand curve D₁ from point a to point b
C) a shift of the demand curve from D₂ to D₁
D) a movement along the demand curve D₂ from point d to point c
E) a movement from point b on the demand curve D₁ to point c on the demand curve D₂

Question 54

Which of the following is likely to shift the current demand curve for a normal good to the right?

A) a decrease in income if the good is a normal good
B) an increase in the price of a complementary good
C) a decrease in the good's price if the good is a normal good
D) an expectation of a surplus in the future
E) an expectation of a shortage in the future

Question 55

Which of the following is the best example of a pair of substitute goods?

A) coffee and cream
B) videotapes and VCRs
C) money and biscuits
D) tortillas and salsa
E) powdered and liquid laundry detergent

Question 56

Exhibit 4.1

Refer to Exhibit 4.1 for the demand curves of baby formula. Which of the following changes is likely to be caused by an increase in the birth rate?

A) a shift of the demand curve from D₁ to D₂
B) a movement along the demand curve D₁ from point a to point b
C) a shift of the demand curve from D₂ to D₁
D) a movement along the demand curve D₂ from point d to point c
E) a movement from point b on the demand curve D₁ to point c on the demand curve D₂

Question 57

Exhibit 4.2

Refer to Exhibit 4.2 of the demand curves for a good. A shift from the demand curve D to the demand curve D' would be caused by a(n) _____

A) decrease in the price of the good under consideration.
B) significant increase in population because of immigration.
C) decrease in consumer income.
D) decrease in the number of producers of the good.
E) increase in the price of an important resource used to produce the good.

Question 58

Exhibit 4.2

Refer to Exhibit 4.2 of the demand curves for a good. A shift from the demand curve D' to the demand curve D would be caused by a(n) _____

A) increase in the price of the good under consideration.
B) significant decrease in the population because of emigration.
C) increase in the price of a substitute good.
D) decrease in the number of producers of the product.
E) decrease in the price of an important resource.

Question 59

Which of the following can account for a decrease in the demand for peanut butter, a normal good?

A) an increase in the supply of peanut butter
B) an increase in the price of peanut butter
C) a substantial increase in the price of bread
D) a drought in Georgia that destroyed 30 percent of the peanut crop
E) an increase in consumer income

Question 60

If butter and margarine are substitute goods, an increase in the price of butter is most likely to _____

A) shift the demand curve for margarine rightward.
B) shift the demand curve for margarine leftward.
C) increase the quantity of margarine demanded.
D) decrease the quantity of margarine demanded.
E) decrease the price of margarine.

Question 61

How would a growing Latino population affect the demand for Latino foods?

A) The quantity demanded for Latino foods will decrease.
B) The demand curve for Latino foods will shift left.
C) The supply curve for Latino foods will shift right.
D) The supply curve for Latino foods shift left.
E) The quantity demanded for Latino foods will increase.

Question 62

The relationship between the price of pizza and the quantity of pizza supplied is called _____

A) demand.
B) supply.
C) the law of demand.
D) the law of supply.
E) there is a market for pizza.

Question 63

The law of supply implies that _____

A) price and quantity demanded are positively related.
B) price and quantity demanded are inversely related.
C) price and quantity supplied are inversely related.
D) price and quantity supplied are positively related.
E) price and quantity demanded are not related.

Question 64

If the price of potato chips increases, other things constant, the demand for potato chip dips will _____

A) decrease, because potato chips are an inferior good.
B) increase, because the goods are substitutes.
C) decrease, because the goods are substitutes.
D) decrease, because the goods are complements.
E) increase, because the goods are complements.

Question 65

The law of supply indicates that _____

A) when prices rise, the quantity demanded rises.
B) when prices rise, the quantity demanded falls.
C) when prices fall, the quantity supplied rises.
D) when prices fall, the quantity supplied falls.
E) when prices rise, the quantity demanded stays the same.

Question 66

Which of the following will lead to an increase in the quantity supplied of a given good?

A) an increase in resource prices
B) a technological improvement
C) an increase in the population
D) an increase in the price of the good
E) an increase in the price of an alternative good

Question 67

As the price of pizza increases, pizza chains are generally willing to sell a larger quantity of pizza in the market. Pizza chains are demonstrating _____

A) demand.
B) supply.
C) the law of demand.
D) the law of supply.
E) there is a market for pizza.

Question 68

If the demographics of consumers in the market for a good change, demand will ______

A) decrease.
B) increase.
C) increase or decrease.
D) stay the same, but price will increase.
E) stay the same, but price will decrease.

Question 69

Which of the following will cause a movement along the demand curve?

A) the money income of consumers
B) consumer expectations
C) consumer tastes
D) the number or composition of consumers in the market
E) a change in price

Question 70

What does a supply schedule show?

A) that the opportunity cost of production increases as quantity supplied increases
B) that price and quantity supplied are inversely related
C) the relationship between supply and demand
D) the quantities supplied at various possible prices
E) the demand at various possible prices

Question 71

What does a supply curve show?

A) the price buyers are willing to pay
B) that price and quantity are inversely related
C) the ratio between supply and prices
D) the average between supply and prices
E) the quantities supplied at various possible prices

Question 72

Which of the following will affect market demand?

A) the money income of consumers
B) consumer expectations
C) consumer tastes
D) the number or composition of consumers in the market
E) a change in price

Question 73

If the number of consumers for a good increases, demand will ______

A) increase.
B) decrease.
C) not change.
D) stay the same, but price will increase.
E) stay the same, but price will decrease.

Question 74

Which of the following best defines supply?

A) the amount of a good that producers want to sell at a fixed price
B) the amount of a good that consumers want to buy at different income levels
C) the amount of a good that producers are willing and able to sell at each possible price, other things constant
D) the amount of a good that is produced at the least possible cost, other things constant
E) the amount of a good that consumers are willing and able to buy at each possible price, other things constant

Question 75

The quantity of a good that producers are willing and able to offer for sale is best explained by:

A) supply.
B) demand.
C) unlimited wants.
D) scarce resources.
E) markets.

Question 76

Producers supply larger quantities of any good at higher prices because _____

A) prices signal product quality.
B) higher prices attract resources from other uses.
C) people are naturally lazy and refuse to give up their leisure.
D) price and quantity supplied are inversely related.
E) of the law of decreasing opportunity cost.

Question 77

If fewer families have young children, the _____

A) quantity demanded of preschool services will decrease.
B) demand curve for preschool services will shift left.
C) supply curve of preschool services will shift right.
D) supply curve of preschool services will shift left
E) quantity demanded of preschool services will increase.

Question 78

_____ indicate(s) how much producers are willing and able to offer for sale per period at each possible price, other things constant.

A) Supply
B) Demand
C) Unlimited wants
D) Scarce resources
E) Markets

Question 79

According to the law of supply, the quantity supplied is _____ related to price, other things constant.

A) inversely
B) negatively
C) directly
D) indirectly
E) never

Question 80

As the price of milk increases, producers are generally willing to sell a larger quantity of milk in the market, other things constant. This represents the law of _____

A) demand.
B) decreasing opportunity costs.
C) variable proportions.
D) diminishing marginal utility.
E) supply.