Question 1

If the population increases, the market demand for most products will

Accepted Answer

As the population increases, there will be more people who potentially want or need those products, leading to an increase in market demand.

Question 2

If consumer preference for a product increases, this will cause the equilibrium price of the product to go down, and the equilibrium quantity of the product to go up.

Accepted Answer

If consumer preference for a product increases, demand for the product will increase causing an increase in equilibrium price and quantity. This is based on the basic law of supply and demand.

Question 3

Suppose that in October the price of a cup of cafe latte was $2.50 and 400 lattes were consumed. In November the price of a latte was $2.00 and 300 lattes were consumed. What might have caused this change?

Accepted Answer

A decrease in the price of a substitute (tea) would make consumers switch from lattes to tea, explaining both the decrease in price and quantity of lattes consumed.

Question 4

A good for which demand decreases when income decreases is known as a(n) ________ good.

Accepted Answer

Normal goods are those for which demand increases as income increases and decreases as income decreases.

Question 5

Suppose that consumers expect the price of a product to decrease in the future. The result is that

Accepted Answer

When consumers expect the price of a product to decrease in the future, they are likely to delay their purchases in anticipation of lower prices. This leads to a decrease in the current demand for the product.

Question 6

Recall the Application about the increase in Chinese demand for pecans to answer the following question(s). Between 2006 and 2009, Chinese imports of U.S. pecans increased from 9 million pounds per year to 88 million pounds per year, and as a result of the increase in demand, the equilibrium price increased by about 50 percent. The increase in demand was caused in part by widespread reports in the Chinese media extolling the health benefits of pecans.
-Recall the Application. The equilibrium price of pecans increased because the demand curve shifted

Accepted Answer

The increase in Chinese demand for pecans caused a shift in the demand curve, moving it up and to the right. This increased the equilibrium price of pecans by about 50 percent.

Question 7

Two goods are complements if an increase in the price of one good leads to an increase in demand for the other.

Accepted Answer

Two goods are complements if an increase in the price of one good leads to a decrease in demand for the other, not an increase.

Question 8

Two goods are substitutes if an increase in the price of one good leads to a decrease in demand for the other.

Accepted Answer

Two goods are substitutes if an increase in the price of one good leads to an increase in demand for the other good, as consumers switch to the relatively cheaper alternative.

Question 9

People will buy more of an inferior good when their income decreases.

Accepted Answer

When people's income decreases, they may not be able to afford higher-quality goods and may have to switch to purchasing inferior goods, which are cheaper alternatives. This is known as the income effect. Therefore, the quantity demanded of the inferior good increases as income decreases.

Question 10

An increase in demand will cause the equilibrium price and quantity to rise, ceteris paribus.

Accepted Answer

When demand increases, it creates a shortage at the original equilibrium price. This encourages sellers to raise their prices, which leads to an increase in the equilibrium price and quantity.

Question 11

A good for which demand decreases when income increases is known as a(n) ________ good.

Accepted Answer

An inferior good is a good for which demand decreases as income increases. This is because consumers shift to higher-quality alternatives as their income increases. Examples of inferior goods include generic brands, fast food, and public transportation.

Question 12

Recall the Application about the increase in Chinese demand for pecans to answer the following question(s). Between 2006 and 2009, Chinese imports of U.S. pecans increased from 9 million pounds per year to 88 million pounds per year, and as a result of the increase in demand, the equilibrium price increased by about 50 percent. The increase in demand was caused in part by widespread reports in the Chinese media extolling the health benefits of pecans.
-According to this Application, between 2006 and 2009, Chinese demand for pecans increased by roughly ________ percent.

Accepted Answer

The increase from 9 million pounds to 88 million pounds represents an increase of 79 million pounds. To find the percentage increase, we divide the increase by the original amount and multiply by 100: (79/9) * 100 = 877.78%, which rounds to 877%.

Question 13

People will buy more of a normal good when their income decreases.

Accepted Answer

When the income of people decreases, they have less money to spend, so they are likely to buy less of normal goods. Normal goods are those for which demand increases as income increases, and they include things like luxury goods, vacation travel, and high-quality clothing. In contrast, inferior goods are those for which demand increases as income decreases, and they include things like fast food, low-quality clothing, and public transportation.

Question 14

If the demand for one good decreases when the price of another good increases, the two goods are ________ goods.

Accepted Answer

When the demand for one good decreases as the price of another good increases, the two goods are considered complementary. This is because the use or consumption of one good enhances the use or consumption of the other, and a price increase in one makes the other less desirable due to the higher overall cost of using both together.

Question 15

If the equilibrium price of a good decreases and the equilibrium quantity of the good decreases, we can conclude that

Accepted Answer

When both the equilibrium price and quantity of a good decrease, it indicates that the demand for the good has decreased. This is because a decrease in demand shifts the demand curve to the left, leading to a lower equilibrium price and quantity.

Question 16

Recall the Application about the increase in Chinese demand for pecans to answer the following question(s). Between 2006 and 2009, Chinese imports of U.S. pecans increased from 9 million pounds per year to 88 million pounds per year, and as a result of the increase in demand, the equilibrium price increased by about 50 percent. The increase in demand was caused in part by widespread reports in the Chinese media extolling the health benefits of pecans.
-Recall the Application. If consumer income in China increased and as a result the demand for pecans decreased, this would indicate that in China, pecans would be considered ________ goods.

Accepted Answer

When consumer income increases, they tend to purchase more expensive or premium goods. Therefore, if demand for a good decreases with an increase in income, it is considered an inferior good.

Question 17

Recall the Application about the increase in Chinese demand for pecans to answer the following question(s). Between 2006 and 2009, Chinese imports of U.S. pecans increased from 9 million pounds per year to 88 million pounds per year, and as a result of the increase in demand, the equilibrium price increased by about 50 percent. The increase in demand was caused in part by widespread reports in the Chinese media extolling the health benefits of pecans.
-According to the Application, one reason for the increase in Chinese demand for pecans was

Accepted Answer

The increase in Chinese demand for pecans was caused in part by widespread reports in the Chinese media extolling the health benefits of pecans, indicating an increase in consumer preferences.

Question 18

If the demand for one good decreases when the price of another good decreases, the two goods are ________ goods.

Accepted Answer

When the demand for one good decreases when the price of another good decreases, it means that the two goods are substitutes for each other. As the price of one good (substitute) decreases, consumers switch their purchases from the other good to this good, leading to a decrease in demand for the latter.

Question 19

Suppose that in 2011, 4 million plasma TVs were purchased at $950 each, while in 2012, 3 million plasma TVs were purchased at $800 each. What might have caused this change?

Accepted Answer

The decrease in plasma TV purchases and the decrease in price suggest that the demand for plasma TVs has decreased, which could be due to a substitution effect caused by the falling price of LCD TVs.

Question 20

If demand for a product increases, ceteris paribus, the equilibrium

Accepted Answer

An increase in demand with all other factors constant will cause a shortage of the product because consumers are willing to buy more at the same price. This will put upward pressure on the price, leading to an increase in the equilibrium price.

Quiz 3: Demand, Supply, and Market Equilibrium