Question 1

For a normal good, an increase in consumer income will lead to I. a movement down the demand curve
II) a rightward shift in the demand curve
III) a reduction in supply

Accepted Answer

An increase in consumer income for a normal good will lead to an increase in demand, resulting in a rightward shift in the demand curve. This is because consumers' ability to purchase the good has increased, leading to increased demand at each price level. There is no relationship between consumer income and supply, so option III can be eliminated. Option I is incorrect because an increase in consumer income would result in an upward movement along the demand curve, not a downward movement.

Question 2

If the demand of a good is inversely related to income, it must be

Accepted Answer

When the demand of a good is inversely related to income, it is known as an inferior good. This means that as income increases, the demand for the good decreases as consumers switch to higher-quality alternatives. A bad good is a product that people don't want to buy, regardless of their income level. A normal good is one where demand increases as income increases. Everyday products are goods that are commonly used but their demand is not necessarily related to income.

Question 3

If two goods are substitutes, then

Accepted Answer

Substitute goods are those that can be used in place of each other. When the price of one substitute good falls, consumers are more likely to purchase it over its substitute, leading to a decrease in demand for the other good.

Question 4

If an increase in the incomes of people who live in the Los Angeles area leads to an increase in the demand for season tickets for games played by the Los Angeles Lakers professional basketball team, then these season tickets are

Accepted Answer

A normal good is a good for which demand increases as income increases. In this case, as the incomes of people in the Los Angeles area increase, their demand for season tickets for the Los Angeles Lakers increases, indicating that these tickets are a normal good.

Question 5

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

Accepted Answer

The cost of inputs in production is a determinant of supply, not demand. Prices of related goods, income, and future price expectations are all determinants of demand.

Question 6

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

Accepted Answer

When the price of a substitute good (Y) falls, consumers are more likely to purchase more of good Y (increasing the quantity demanded of Y) and less of good X, leading to a decrease in the demand for good X.

Question 7

Which of the following statements is FALSE?

Accepted Answer

An increase in income causes a decrease in the demand for an inferior good, so statement D is false. When people's income increases, they tend to purchase more normal goods, which leads to an increase in demand for these goods. Conversely, when people's income decreases, they tend to purchase fewer normal goods, leading to a leftward shift in the demand curve. However, for inferior goods, as income increases, demand decreases, leading to a leftward shift in the demand curve.

Question 8

In economic terminology, a normal good is a good

Accepted Answer

A normal good is a good for which demand increases when income increases. This means that as people's income rises, they are able and willing to buy more of the good at each price level. Normal goods are the opposite of inferior goods, for which demand decreases as income rises.

Question 9

Fashion trends are a nonprice determinant for demand because

Accepted Answer

Fashion trends influence people's tastes and preferences in clothing, which are factors that determine demand. As such, they are a nonprice determinant of demand.

Question 10

Which of the following will cause a rightward shift of the demand curve?

Accepted Answer

An increase in the expected future price of the good will cause consumers to want to buy more of the good now before the price increase, resulting in a rightward shift of the demand curve. A decrease in the cost of production would shift the supply curve to the right, not the demand curve. A decrease in the price of the good would cause a movement along the demand curve, not a shift. Therefore, only option C would cause a rightward shift of the demand curve.

Question 11

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

Accepted Answer

If goods X and Y are substitute goods, an increase in the price of Y makes it relatively more expensive and consumers will switch to consuming more of good X as a substitute for Y. Therefore, quantity demanded of Y will decrease, but the demand for X will increase, resulting in an increase in the quantity demanded of X. Choice A is incorrect because the increase in price of Y does not necessarily result in a decrease in the amount of X consumed. Choice B is incorrect because an increase in the price of Y will have an effect on the amount of X consumed. Choice D is incorrect because an increase in price of Y will result in a decrease in the quantity demanded of Y, it is not the same as having no effect on it.

Question 12

Which of the following statements is FALSE?

Accepted Answer

C is false because if the price of a good rises, the quantity demanded of the good decreases, which is represented by a movement upward along the demand curve, not a shift of the demand curve itself. The demand curve shifts only when there are changes in non-price determinants of demand, such as consumer preferences, income, prices of related goods, etc.

Question 13

Assume that coffee and tea are substitutes. Given a downward sloping demand curve for tea, an increase in the price of tea will cause

Accepted Answer

Since coffee and tea are substitutes, an increase in the price of tea will make coffee a relatively cheaper alternative, leading to an increase in the demand for coffee. Therefore, the answer is A.

Question 14

In economic terminology, an inferior good is a good

Accepted Answer

An inferior good is a good for which demand increases as income decreases. This is because people with lower incomes may find inferior goods to be more affordable or necessary than higher-quality goods. Examples of inferior goods include low-quality off-brand products, used cars, and discount fast food. Options A, B, and C are incorrect as they do not describe the characteristics of an inferior good.

Question 15

Sarah gets a salary increase. Before her raise, she purchased 5 pounds of fish and 1 pound of beef stew a month. After her raise, she consumes 2 pounds of fish and 3 pounds of beef stew a month. If everything else is held constant, we know that

Accepted Answer

When Sarah's income increases, she buys less fish and more beef stew, indicating that she views fish as an inferior good (buying less of it as her income increases) and beef stew as a normal good (buying more of it as her income increases).

Question 16

All of the following will affect the position of the demand curve EXCEPT

Accepted Answer

Changes in the prices of resources used to produce the product will impact the supply curve, not the demand curve. A, B, and C all directly affect consumer demand and would cause a shift in the demand curve.

Question 17

A demand curve for a normal good

Accepted Answer

A demand curve for a normal good shows the inverse relationship between price and quantity demanded. As the price of a good increases, the quantity demanded decreases. This is because as the price of a good increases, it becomes relatively more expensive compared to other goods, so consumers are less willing and able to buy it. This relationship is reflected in a downward-sloping demand curve. Additionally, a normal good is one for which demand increases as income increases, so changes in income can shift the entire demand curve either to the right (if income increases) or to the left (if income decreases).

Question 18

An inferior good is one for which

Accepted Answer

An inferior good is one for which demand decreases as income increases. This is because, as people's income increases, they tend to switch to higher-quality substitutes, which are generally considered superior goods. Examples of inferior goods include fast food, generic brands, and public transportation.

Question 19

Suppose an individual experiences a permanent increase in income. As a result of this increased income, further assume that the individual eats dinner at restaurants more frequently each month. This information suggests that dinners at restaurants for this individual are

Accepted Answer

This individual's behavior suggests that dinners at restaurants are a normal good for him/her, as the increase in income leads to an increase in consumption of this good. If dinners at restaurants were an inferior good, the individual would have decreased consumption with an increase in income, and if they were a substitute good, the individual would have shifted consumption away from them towards a substitute good with an increase in income. The option D is incorrect as complimentary goods are consumed together and the question only provides information about the increase in consumption of one good.

Question 20

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

Accepted Answer

When the price of bagels decreases, consumers are likely to buy more bagels instead of croissants, leading to a decrease in the demand for croissants. This is represented by a leftward shift in the demand curve for croissants.

Quiz 3: Demand and Supply

For a normal good, an increase in consumer income will lead to I. a movement down the demand curve II) a rightward shift in the demand curve III) a reduction in supply

If the demand of a good is inversely related to income, it must be

If two goods are substitutes, then

If an increase in the incomes of people who live in the Los Angeles area leads to an increase in the demand for season tickets for games played by the Los Angeles Lakers professional basketball team, then these season tickets are

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

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

Which of the following statements is FALSE?

In economic terminology, a normal good is a good

Fashion trends are a nonprice determinant for demand because

Which of the following will cause a rightward shift of the demand curve?

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

Which of the following statements is FALSE?

Assume that coffee and tea are substitutes. Given a downward sloping demand curve for tea, an increase in the price of tea will cause

In economic terminology, an inferior good is a good

Sarah gets a salary increase. Before her raise, she purchased 5 pounds of fish and 1 pound of beef stew a month. After her raise, she consumes 2 pounds of fish and 3 pounds of beef stew a month. If everything else is held constant, we know that

All of the following will affect the position of the demand curve EXCEPT

A demand curve for a normal good

An inferior good is one for which

Suppose an individual experiences a permanent increase in income. As a result of this increased income, further assume that the individual eats dinner at restaurants more frequently each month. This information suggests that dinners at restaurants for this individual are

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