Question 1

Draw a demand curve and label it D1. On the graph, illustrate an increase in demand and a decrease in demand, and label the curves D2 and D3, respectively. Starting on demand curve D₁, explain the shift that would result from each of the following events: a. a decrease in income and the good is a normal good b. a decrease in income and the good is an inferior good c. an increase in the price of a substitute good d. an increase in the price of a complementary good e. a decrease in the taste for the good f. an increase in population g. a decrease in the expected future price of the good

Accepted Answer

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Question 2

For each of the following pairs of products, state which are complements, which are substitutes, and which are unrelated.
a. House plants and potato chips
b. Eyeglasses and contact lenses
c. Motorcycles and gasoline
d. Smartphones and smartphone apps
e. Red wine and white wine

Accepted Answer

The answer of For each of the following pairs of...

Question 3

For each of the following pairs of products, state which are complements, which are substitutes, and which are unrelated.
a. Swim fins and scuba tanks
b. Coca Cola and Volkswagens
c. Printers and ink cartridges
d. Ice and ice chests
e. Heineken and Corona

Accepted Answer

The answer of For each of the following pairs of...

Question 4

Suppose that in October, market analysts predict that the price of platinum will fall in November. What happens in the platinum market in October, holding everything else constant?
A) The supply curve shifts to the right.
B) The supply curve shifts to the left.
C) The quantity of platinum demanded and the quantity of platinum supplied both increase.
D) The demand curve shifts to the right.

Accepted Answer

The answer of Suppose that in October, market analysts predict...

Question 5

Figure 3-2 -Refer to Figure 3-2. An increase in the number of firms in the market would be represented by a movement from A) A to B. B) B to A. C) S₁ to S₂. D) S₂to S₁.

Accepted Answer

An increase in the number of firms in the market would increase the overall market supply, shifting the supply curve to the right from S1 to S2.

Question 6

What is the Law of Demand.

Accepted Answer

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Question 7

A supply schedule
A) is a table that shows the relationship between the price of a product and the quantity of the product supplied.
B) is a curve that shows the relationship between the price of a product and the quantity of the product supplied.
C) is the relationship between the supply of a product and the cost of producing the product.
D) is a table that shows the relationship between the price of a product and the quantity of the product that producers and consumers are willing to exchange.

Accepted Answer

A supply schedule is a table that shows the relationship between the price of a product and the quantity of the product supplied. It provides important information for producers in determining the optimal quantity of a product to supply at each price level.

Question 8

Explain the difference between substitutes and complements.

Accepted Answer

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Question 9

Use the following demand schedule for cherries to draw a graph of the demand curve. Be sure to label the demand curve and each axis, and show each point on the demand curve.

Accepted Answer

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Question 10

One would speak of a change in the quantity of a good supplied, rather than a change in supply, if
A) supplier expectations about future prices change.
B) the price of the good changes.
C) the cost of producing the good changes.
D) prices of substitutes in production change.

Accepted Answer

A change in the price of a good would lead to a movement along the supply curve, resulting in a change in the quantity supplied, but not a shift in the entire supply curve as a whole. Choices A, C, and D refer to factors that would cause a change in supply, resulting in a shift of the entire supply curve.

Question 11

If in the market for oranges the supply has increased, then
A) the supply curve for oranges has shifted to the right.
B) the supply curve for oranges has shifted to the left.
C) there has been a movement upwards along the supply curve for oranges.
D) there has been a movement downwards along the supply curve for oranges.

Accepted Answer

An increase in supply causes the supply curve to shift to the right. This means more oranges are now available at each price point, leading to a new equilibrium with lower prices and higher quantities demanded.

Question 12

Cole was discussing the market for cocoa beans with his friend John Schmidt. Cole said, "Ever since Venezuela announced that its cocoa harvest was its lowest ever in fifteen years, the price of cocoa beans has been rising and rising and people are buying more and more. I think the demand for cocoa beans must be upward sloping." Is Cole right? Briefly explain why or why not.

Accepted Answer

The answer of Cole was discussing the market for cocoa...

Question 13

Which of the following would cause a decrease in the supply of milk?
A) an increase in the price of cookies (assuming that milk and cookies are complements)
B) a decrease in the price of milk
C) an increase the price of a product that producers sell instead of milk
D) an increase in the number of firms that produce milk

Accepted Answer

If the price of a substitute product that producers sell instead of milk increases, producers may shift their resources to producing that product instead, causing a decrease in the overall supply of milk.

Question 14

Figure 3-2 -Refer to Figure 3-2. A decrease in the price of the product would be represented by a movement from A) A to B. B) B to A. C) S₁ to S₂. D) S₂to S₁.

Accepted Answer

The answer of Figure 3-2 
-Refer to Figure 3-2. A...

Question 15

Last year, the Pottery Palace supplied 8,000 ceramic pots at $40 each. This year, the company supplied the same quantity of ceramic pots at $55 each. Based on this evidence, The Pottery Palace has experienced
A) a decrease in supply.
B) an increase in supply.
C) an increase in the quantity supplied.
D) a decrease in the quantity supplied.

Accepted Answer

The answer of Last year, the Pottery Palace supplied 8,000...

Question 16

If in the market for peaches the supply curve has shifted to the left
A) the supply of peaches has increased.
B) the supply of peaches has decreased.
C) the quantity of peaches supplied has increased.
D) the quantity of peaches supplied has decreased.

Accepted Answer

When the supply curve shifts to the left, it means that the suppliers are either unwilling or unable to supply the same quantity of peaches as before at the same prices. This could happen if there is a decrease in the availability of peaches due to weather conditions, disease, or other factors that can affect the production of peaches. As a result, the supply of peaches decreases, leading to a decrease in the quantity of peaches supplied.

Question 17

Figure 3-2 -Refer to Figure 3-2. An increase in the price of substitutes in production would be represented by a movement from A) A to B. B) B to A. C) S₁ to S₂. D) S₂to S₁.

Accepted Answer

An increase in the price of substitutes in production would cause producers to switch to producing more of the substitute good, leading to a decrease in supply of the original good, represented by a shift from S₂ to S₁.

Question 18

What is the difference between a demand schedule and a demand curve?

Accepted Answer

The answer of What is the difference between a demand...

Question 19

What is the difference between an "increase in supply" and an "increase in quantity supplied"?
A) There is no difference between the two terms; they both refer to a shift of the supply curve.
B) There is no difference between the two terms; they both refer to a movement along a given supply curve.
C) An "increase in supply" means the supply curve has shifted to the right while an "increase in quantity supplied" means at any given price supply has increased.
D) An "increase in supply" means the supply curve has shifted to the right while an "increase in quantity supplied" refers to a movement along a given supply curve in response to an increase in price.

Accepted Answer

The answer of What is the difference between an "increase...

Question 20

Figure 3-2 -Refer to Figure 3-2. An increase in price of inputs would be represented by a movement from A) A to B. B) B to A. C) S₁ to S₂. D) S₂to S₁.

Accepted Answer

An increase in the price of inputs would cause a decrease in supply, shifting the supply curve from S₂ to S₁.

Quiz 3: Where Prices Come From: the Interaction of Demand and Supply

For each of the following pairs of products, state which are complements, which are substitutes, and which are unrelated. a. House plants and potato chips b. Eyeglasses and contact lenses c. Motorcycles and gasoline d. Smartphones and smartphone apps e. Red wine and white wine

For each of the following pairs of products, state which are complements, which are substitutes, and which are unrelated. a. Swim fins and scuba tanks b. Coca Cola and Volkswagens c. Printers and ink cartridges d. Ice and ice chests e. Heineken and Corona

Suppose that in October, market analysts predict that the price of platinum will fall in November. What happens in the platinum market in October, holding everything else constant?

Figure 3-2 -Refer to Figure 3-2. An increase in the number of firms in the market would be represented by a movement from

What is the Law of Demand.

A supply schedule

Explain the difference between substitutes and complements.

Use the following demand schedule for cherries to draw a graph of the demand curve. Be sure to label the demand curve and each axis, and show each point on the demand curve.

One would speak of a change in the quantity of a good supplied, rather than a change in supply, if

If in the market for oranges the supply has increased, then

Which of the following would cause a decrease in the supply of milk?

Figure 3-2 -Refer to Figure 3-2. A decrease in the price of the product would be represented by a movement from

Last year, the Pottery Palace supplied 8,000 ceramic pots at $40 each. This year, the company supplied the same quantity of ceramic pots at $55 each. Based on this evidence, The Pottery Palace has experienced

If in the market for peaches the supply curve has shifted to the left

Figure 3-2 -Refer to Figure 3-2. An increase in the price of substitutes in production would be represented by a movement from

What is the difference between a demand schedule and a demand curve?

What is the difference between an "increase in supply" and an "increase in quantity supplied"?

Figure 3-2 -Refer to Figure 3-2. An increase in price of inputs would be represented by a movement from