Deck 3: Demand and Supply

Question 1

When the term "price" is used in the law of demand,price means

A)the price of the good relative to the price of another good or to the average price of all other goods.
B)the nominal price of the good relative to its nominal price in the previous year.
C)the absolute price of the good.
D)the dollar price of the good.

Answer 1

the price of the good relative to the price of another good or to the average price of all other goods.

Question 2

The law of demand states that,other things being equal,

A)the quantity of a good or service demanded is inversely related to its price.
B)the quantity of a good or service demanded is directly related to its price.
C)changes in price and changes in quantity demanded move in the same direction.
D)people always demand less at lower prices and more at higher prices.

Answer 2

the quantity of a good or service demanded is inversely related to its price.

Question 3

The law of demand states that,ceteris paribus,

A)a higher price will lead to increased sales.
B)the price can never be too high for some consumers.
C)consumers have unlimited demands for a good.
D)quantity demanded will vary inversely with the price of the good.

Answer 3

quantity demanded will vary inversely with the price of the good.

Question 4

The price of a movie increased from $5 to $7 while the price of renting a movie video increased from $2 to $3.50.The price of attending a movie relative to the price of renting a video

A)decreased,but we need more information to know by how much.
B)increased,but we need more information to know by how much.
C)increased from 0.4 to 0.5.
D)decreased from 2.5 to 2.0.

Question 5

Bill quits his job to pursue an MBA degree full time.Tickets for the theatre fall in price,but he does not renew his season tickets for the new season.Bill's decision not to renew is most likely due to

A)failure to follow the law of demand,which would say he would buy more tickets at the lower price.
B)a reduction in his income while he is in graduate school.
C)a change in tastes on Bill's part.
D)the opportunity to buy football tickets at the university.

Question 6

The relative price of a good is its price

A)expressed in constant 1990 dollars.
B)that is equal to the equilibrium price.
C)expressed in today's dollars.
D)expressed in terms of the price of another good.

Question 7

Which of the following is most likely to be an example of the law of demand in action?

A)A decrease in the price of milk has no effect on the amount of milk consumed.
B)The amount of candy sold increases while the price of candy remains constant.
C)An increase in the price of eggs is followed by an increase in the sales of eggs.
D)An increase in the price of gasoline is followed by a reduction in gasoline sales.

Question 8

In determining the demand for a good,economists

A)hold constant all other influences on demand except the product price.
B)assume no consumer will allocate all of her income to one good.
C)allow income to change at each point on the demand schedule.
D)assume consumers have equal incomes to allocate among goods.

Question 9

In economics,the term "demand" refers to

A)the quantity of a good or service that people will buy at a particular price.
B)the intensity of desire for a good or service.
C)the quantity of a good or service that people want to consume.
D)the quantities of a good or service people would be willing and able to buy at various prices.

Question 10

If other factors remain constant,the Canadian government's lowering of taxes on consumer electronic products would result in

A)a decrease in demand for consumer electronic products in Canadian border towns.
B)a decrease in demand for consumer electronic products by Canadians in U.S.border towns.
C)an increase in demand for consumer electronic products in United States border towns.
D)no change in demand for consumer electronic products.

Question 11

The price of a new textbook was $60 in one year and $75 two years later.Over the same period,the price of a used copy of the text rose from $25 to $37.50.Over the two years,the relative price of a new textbook

A)increased by 25 percent.
B)decreased from 2.4 to 2.0.
C)increased from 2.4 to 3.
D)decreased from 1.4 to 1.25

Question 12

An increase in the price of coffee,holding other things constant,will

A)increase the demand for coffee.
B)decrease the supply of coffee.
C)decrease the quantity of coffee demanded.
D)decrease the demand for coffee.

Question 13

The quantity of a good or service people would be willing and able to purchase at each possible price during a specified time period,other things constant,is the definition of ________.

Question 14

The money price of a good is also known as its

A)absolute price.
B)subjective price.
C)relative price.
D)case price.

Question 15

The price of a new car is $20 000 while the price of a five-year old car of the same brand is $8 000.The next year the price of the new car increases to $22 000 and the price of a five-year old car of the same brand is $8 800.The relative price of the used car

A)increased by $800.
B)decreased by 10 percent.
C)increased by 10 percent.
D)remained constant at 0.4.

Question 16

Which of the following will cause a decrease in the quantity of shoes demanded,ceteris paribus?

A)an increase in income
B)a decrease in the price of socks
C)an increase in the price of shoes
D)an expected increase in shoe prices

Question 17

The term ceteris paribus means ________.

Question 18

The "other things" constant when we examine the effects of prices on quantities demanded do NOT include

A)the price of the product itself.
B)the price of substitutes.
C)the price of complements.
D)consumer incomes.

Question 19

The price of a new textbook increases from $60 to $75 while over the same period the price of a used textbook increased by 25 percent.What happened to the relative price of a used textbook?

Question 20

The money price of a good (in dollars)is that price

A)expressed in constant 1980 dollars.
B)that would clear the market.
C)expressed in today's dollars.
D)expressed in purchasing power against a common item like bread.

Question 21

The market demand curve for a particular good

A)is the horizontal sum of each individual demand curve for the good.
B)may be less than an individual demand curve for the good.
C)will not be affected by any of the determinants of individual demand.
D)may or may not show a direct relationship between price and quantity demanded.

Question 22

An inferior good is one for which

A)the demand curve is vertical.
B)demand decreases as income increases.
C)the demand curve slope is positive.
D)demand increases as income increases.

Question 23

Table 3-1

In Table 3-1,if Buyer 2 leaves the market,what market quantity would be demanded at a price of $10?

A)33
B)25
C)22
D)8

Question 24

Table 3-1

In Table 3-1,each of the four buyers in this market

A)has a positively sloped demand curve for CDs.
B)has a negatively sloped demand curve for CDs.
C)considers CDs to be a normal good.
D)considers CDs to be an inferior good.

Question 25

Suppose that the demand curve for apples is downward sloping,and that with other things remaining equal,the price per tonne increases from $234 to $244.We would then expect

A)the demand curve for apples to shift leftward toward the origin.
B)the demand for apples to decrease.
C)an increase in the quantity of apples demanded.
D)a fall in the quantity of apples demanded.

Question 26

A demand curve is a graphical representation of

A)consumer tastes.
B)relative prices.
C)a demand schedule.
D)national income.

Question 27

A demand schedule is a way of recording

A)the amount of a good that a person wants to sell during a given time period.
B)the amount of a good that a person wants at different times of the day.
C)the quantities of a good that people are willing to sell every year.
D)the alternative quantities of a good demanded in a given time period at different possible prices.

Question 28

If a particular good or service is an inferior and an increase in consumer income occurs,ceteris paribus,which of the following statements is FALSE?

A)At a given price,less will be spent on the good.
B)There will be a decrease in demand for the good.
C)The demand curve for the good will shift toward the origin.
D)There will be an increase in demand for the good.

Question 29

An increase in consumer income would lead to which of the following for a normal good?
I.a movement along the demand curve
II.an outward shift in the demand curve
III.an increase in supply

A)I only
B)II only
C)III only
D)Both II and III

Question 30

Table 3-1

In Table 3-1,at a price of $8,market quantity demanded would be ________ units.

Question 31

The market demand curve for a commodity is found by

A)summing the quantities demanded by each individual at each possible price.
B)studying census data.
C)summing the prices each consumer would pay for each quantity.
D)taking the average of the individual demand curves.

Question 32

Table 3-1

In Table 3-1,what is the highest price at which a producer could sell 24 CDs?

A)$16
B)$10
C)$14
D)$12

Question 33

Table 3-1

In Table 3-1,how many additional CDs could a retailer sell by cutting the price from $18 to $16?

A)4
B)5
C)7
D)9

Question 34

A market demand schedule for a product indicates that

A)as a product's price rises,consumers buy more of that good.
B)there is a direct (positive)relationship between price and quantity demanded.
C)as the product's price falls,consumers buy less of the good.
D)there is an inverse (negative)relationship between price and quantity demanded.

Question 35

Table 3-1

In Table 3-1,what quantity of CDs would be demanded at a price of $12?

A)6
B)9
C)12
D)24

Question 36

Table 3-1

In Table 3-1,if the price is increased from $16 to $18,ceteris paribus,market quantity demanded will fall by ________ units.

Question 37

A demand schedule holds

A)product price constant.
B)equilibrium constant.
C)product quantity constant.
D)product quality constant.

Question 38

Adding the quantities of a good or service demanded by each consumer at every price will yield

A)the total substitution effect from a price change.
B)the number of consumers.
C)the market-clearing price.
D)the market demand curve.

Question 39

Table 3-1

In table 3-1,what is the market quantity demanded at a price of $8?

A)5
B)15
C)35
D)44

Question 40

When economists talk about a demand schedule for a product,they mean a schedule recording ________.

Question 41

Which one of the following is NOT a determinant of demand?

A)income
B)future price expectations
C)the prices of related goods
D)the cost of inputs in production

Question 42

In economic terminology,an inferior good is a good or service for which ________.

Question 43

If macaroni and cheese is an inferior good and an increase in consumer income occurs,then which of the following statements is TRUE?

A)At a given price,more will be spent on macaroni and cheese.
B)There will be an increase in demand for macaroni and cheese.
C)The demand curve for macaroni and cheese will shift farther away from the origin.
D)There will be a decrease in demand for macaroni and cheese.

Question 44

Which of the following is NOT a determinant of consumer demand?

A)tastes and preferences
B)household income
C)the state of technology
D)prices of related goods

Question 45

The demand curve for a normal good

A)is constructed based on the assumption that income is rising.
B)shifts to the right when income increases,ceteris paribus.
C)slopes upward and to the right.
D)shifts to the left when income increases,ceteris paribus.

Question 46

If goods X and Y are substitute goods,then a decrease in the price of Y,other things constant,

A)has no real effect on the quantity demanded of good Y,but increases the demand for X.
B)results in an increase in the quantity of Y demanded and a decrease in the demand for X.
C)results in a decrease in the amounts of both X and Y demanded.
D)increases the quantity of Y demanded,but has no effect on the amount of X demanded.

Question 47

The demand for a coffee ________ when the price of cream decreases.

A)will fall.
B)will shift outward.
C)remains constant.
D)will shift inward.

Question 48

Which of the following statements about demand is FALSE?

A)An increase in income causes an increase in the demand for a normal good.
B)A decrease in income causes the demand curve for a normal good to shift to the left.
C)An increase in income causes a decrease in the demand for an inferior good.
D)An increase in income causes the demand curve for an inferior good to shift to the right.

Question 49

The position of the market demand curve will be affected by all of the following EXCEPT

A)tastes and preferences.
B)consumer incomes.
C)changes in expectations of future relative prices.
D)prices of the resources used to produce the product.

Question 50

If X and Y are substitute goods,then an increase in the price of Y,other things constant,

A)has no effect on the quantity demanded of good Y,but increases the demand for X.
B)results in a decrease in the quantity of Y demanded and an increase in the demand for X.
C)results in a decrease in the quantity Y demanded and a decrease in the demand for X.
D)decreases the quantity demanded of Y,but has no effect on the demand for X.

Question 51

In economic terminology,a normal good is a good or service

A)that is liked only by normal people.
B)for which demand increases when price increases.
C)for which demand increases when income increases.
D)for which quantity demanded increases when income increases.

Question 52

Suppose that goods X and Y are substitutes and the price of good Y falls.We would then expect

A)a decrease in the demand for good X and an increase in the quantity of good Y demanded.
B)an increase in the demand for good Y and a decrease in the demand for good X.
C)the quantity demanded of good Y to increase and the demand for good X to increase also.
D)an increase in demand for both good X and good Y.

Question 53

If two goods are substitutes for one another,then

A)if the price of one good falls,the demand for the other good falls.
B)there is an inverse relationship between changes in the price of one good and changes in the demand for the other.
C)an increase in the price of one causes the demand for the other to fall.
D)changes in the quantity demanded of one good will not affect the demand for the other.

Question 54

Which one of the following goods would most likely be an inferior good?

A)Bordeaux wines
B)Broadway theater tickets
C)corn meal
D)filet mignon

Question 55

Assume that beef and chicken are substitutes.Given a downward sloping demand curve for beef,a fall in beef prices will result in ________.

Question 56

Figure 3-1
In Figure 3-1,if both A and B are inferior goods,the effect of an increase in income is best shown by the

A)shift of D₂ to D₁ in Graph A.
B)movement along D₀ from P₂ to P₁ in Graph B.
C)movement along D₀ from P₁ to P₂ in Graph B.
D)shift of D₁ to D₂ in Graph A.

Question 57

Sarah gets a raise in pay of twenty percent.Before her raise,she purchased 5 kilograms of hamburger and 1 kilogram of steak a month.After her raise,she consumes 3 kilograms of steak and 2 kilograms of hamburger a month.If no other relevant influence has changed,we know that for Sarah

A)both steak and hamburger are normal goods.
B)hamburger is an inferior good and steak is a normal good.
C)hamburger is a normal good and steak is an inferior good.
D)both steak and hamburger are inferior goods.

Question 58

Which of the following is a determinant of demand?

A)cost of production
B)income
C)technology
D)number of suppliers

Question 59

Figure 3-1
In Figure 3-1,if both A and B are normal goods,the effect of an increase in income is best shown by the

A)shift of D₂ to D₁ in Graph A.
B)movement along D₀ from P₂ to P₁ in Graph B.
C)movement along D₀ from P₁ to P₂ in Graph B.
D)shift of D₁ to D₂ in Graph A.

Question 60

We observe that people buy less steak and more hamburger when the relative price of steak increases.This indicates that steak and hamburger are

A)substitutes.
B)complements.
C)non-economic goods.
D)nondirectional goods.

Question 61

An increase in the price of corn,ceteris paribus,will lead to

A)an upward (and leftward)movement along the demand curve.
B)an inward shift in demand.
C)an increase in the quantity of corn consumed.
D)an outward shift in the supply of corn.

Question 62

An expected increase in the price of automobiles will lead to

A)no predictable impact on today's demand for automobiles.
B)a movement down the demand schedule for automobiles.
C)an outward shift in demand for automobiles today.
D)a reduction in the demand for gasoline today.

Question 63

If bagels and croissants are substitute goods,which of the following is likely to occur if the price of bagels falls?

A)a leftward movement along the bagel demand curve
B)a shift to the right in the demand curve for croissants
C)a shift to the left in the demand curve for bagels
D)a shift to the left in the demand curve for croissants

Question 64

Suppose a college increases the wages paid to its student employees.Which of the following is the most likely effect of the wage increases on the market for college logo sweat shirts in the bookstore?

A)a leftward movement along the demand curve
B)the demand curve shifts to the right
C)the demand curve shifts to the left
D)a rightward movement along the demand curve

Question 65

The expectation of a future increase in the price of gasoline is likely to

A)make gasoline an inferior good.
B)increase gasoline demand now.
C)increase the supply of gasoline now.
D)decrease gasoline demand now.

Question 66

After a fall in the price of songs downloaded from the Internet,Phil purchases fewer CDs and buys a new MP₃ player.For Phil,

A)MP₃ players and CDs are complements.
B)CDs,downloaded music and MP₃ players are all substitutes.
C)CDs and downloaded songs are substitutes;downloaded songs and MP₃ players are complements.
D)MP₃ players,CDs and CD players all are complements.

Question 67

An increase in demand for cheese would be caused by

A)an increase in the price of a complement such as biscuits.
B)a decrease in the price of a complement.
C)a reduction in income,given that cheese is a normal good.
D)a decrease in the price of apples.

Question 68

If the price of apples goes down,then the demand for pears will

A)decrease if apples and pears are complements.
B)remain constant if apples and pears are related goods.
C)decrease if apples and pears are substitutes.
D)increase if apples and pears are substitutes.

Question 69

Two goods are substitutes if

A)the two goods have the same price.
B)the more you buy of one,the less you buy of the other.
C)the two goods are used together.
D)the more you have of one,the more you want the other.

Question 70

A large increase in the price of tennis balls will most likely lead to

A)an inward shift in the demand for tennis balls.
B)an increase in the demand for tennis racquets.
C)an inward shift in the demand for tennis racquets.
D)a movement along the demand curve for tennis racquets.

Question 71

When the price of coffee beans increased in the mid-1970s,restaurants that raised the price of a cup of coffee experienced a decrease in demand for donuts because donuts and coffee are

A)complementary goods.
B)economic goods.
C)inferior goods.
D)substitute goods.

Question 72

An increase in perks offered to potential college students could be the result of

A)the high price of a college education.
B)a new "social consciousness" on the part of colleges.
C)a decrease in the number of college-entry aged Canadians.
D)a higher percentage of high school graduates going on to college.

Question 73

Which of the following pairs of goods would most likely be substitutes?

A)beer and wine
B)razors and razor blades
C)gasoline and motor oil
D)hot dog buns and hot dogs

Question 74

There is an increase in the quantity of cream demanded when the price of coffee falls.If other things have remained constant,we can conclude that coffee and cream are

A)complementary goods.
B)inferior goods.
C)independent goods.
D)substitute goods.

Question 75

If the price of butter increases,the demand for margarine

A)will shift outward.
B)will kink into an S-curve.
C)will be unchanged.
D)will shift inward.

Question 76

Which of the following would most likely be complementary goods?

A)beef and chicken.
B)beer and pretzels.
C)margarine and butter.
D)tea and coffee.

Question 77

An expected increase in the price of a good next month is likely to

A)increase demand now.
B)decrease demand now.
C)decrease the quantity demanded now.
D)increase the quantity demanded now.

Question 78

When the price of beef rises,the demand for chicken increases because beef and chicken are

A)consumer goods.
B)inferior goods.
C)complementary goods.
D)substitute goods.

Question 79

When the price of a good falls,there will be

A)no change in quantity demanded.
B)an outward shift in the demand for the good.
C)a movement along the good's demand curve.
D)both an outward shift in the demand for the good and a movement along the good's demand curve.

Question 80

If the price of hot dogs increases,the demand for hot dog buns will

A)shift to the right.
B)increase.
C)decrease.
D)remain constant.