Deck 3: Demand, Supply, and Price

Question 1

Excess demand is the same thing as

A)the area to the left of the equilibrium price on a supply and demand diagram.
B)quantity demanded exceeding quantity supplied.
C)quantity supplied exceeding quantity demanded.
D)excess supply.
E)the area to the right of the equilibrium price on a supply and demand diagram.

Answer 1

B

Question 2

Suppose new medical research suggests that consuming 200 grams of tofu everyday helps to prevent heart disease. Widespread knowledge of this research, other things being equal, is likely to have what impact on the market for tofu?

A)shift the whole demand curve to the left
B)there would likely be no effect.
C)movement along the demand curve to the right
D)shift the whole demand curve to the right
E)movement along the demand curve to the left

Answer 2

D

Question 3

Suppose we observe an increase in the price of good A and an increase in the quantity of good A exchanged. Which of the following is a likely explanation?

A)The supply of good A has increased.
B)The "law of supply" is violated.
C)The "law of demand" is violated.
D)The demand for good A has increased.
E)There is an excess supply of good A.

Answer 3

D

Question 4

If the price of tea falls and as a consequence the demand for sugar rises, then tea and sugar are

A)luxury goods.
B)independent goods.
C)complementary goods.
D)neutral goods.
E)substitute goods.

Question 5

Economists say there has been a change in demand when there is

A)a price change.
B)a movement along the demand curve.
C)a shift of the supply curve.
D)a shift of the demand curve.
E)a quantity change.

Question 6

A left ward shift in the supply curve indicates

A)a decrease in the quantity supplied at each price.
B)that an increase in income results in an increase in the quantity demanded at each price.
C)that more is demanded at each price.
D)that more suppliers have entered the industry.
E)an increase in the quantity supplied at each price.

Question 7

Suppose the demand curves for goods A, B, and C have the following functional forms, where Q denotes quantity demanded, P denotes price, and M denotes income: Q_A = 120 - 3.5P_A - 6P_B + 14M Q_B= 100 - 2P_B + 3P_C + 1.1M Q_C = 1500 - 0.5P_C - 300M.
Based on these demand curves, which of the following goods are known to be inferior goods?

A)A
B)B
C)C
D)A and B only
E)A, B and C

Question 8

A demand curve is

A)a numerical table showing the inverse relationship between quantity demanded and price, other things being equal.
B)a timetable showing the quantity demanded at different time periods.
C)an abstract concept underlying the graph of a demand curve.
D)a functional statement of the demand relationship.
E)a graph showing the relationship between quantity demanded and the price of a commodity, other things being equal.

Question 9

Which of the following would cause a movement along the demand curve for ski- lift tickets, other things being equal?

A)an increase in price as the supply curve for lift tickets shifts to the left
B)a change in tastes in favour of skiing
C)a rise in average household income
D)a rise in the price of ski boots and skis
E)an increase in population

Question 10

The price of one good divided by the price of another good is called a

A)ceteris paribus price.
B)absolute price.
C)marginal price.
D)relative price.
E)money price.

Question 11

A fall in the price of raw milk (which is used in the production of ice cream)will

A)decrease the supply of ice cream, causing the supply curve to shift to the right.
B)have no effect on the supply curve of ice cream but cause a downward movement along the supply curve of ice cream.
C)increase the supply of ice cream, causing the supply curve of ice cream to shift to the right.
D)decrease the supply of ice cream, causing the supply curve of ice cream to shift to the left.
E)increase the supply of ice cream, causing the supply curve to shift to the left.

Question 12

A decrease in supply

A)has the same meaning as "a decrease in quantity supplied."
B)refers to a drop in the quantity actually exchanged.
C)is likely to result from a decrease in the price of a factor of production.
D)refers to a leftward shift in the supply curve.
E)refers to a downward movement along a supply curve.

Question 13

If goods X and Y are complements and the price of X falls, all other things being equal, the demand curve for Y will

A)unable to determine.
B)not shift at all.
C)shift to the left.
D)shift to the right.

Question 14

If the legal beer- drinking age is raised from 18 to 21, the changes to the equilibrium price and quantity of beer are likely to be that

A)price falls and quantity rises.
B)price rises and quantity rises.
C)no change in price or quantity occurs.
D)price rises and quantity falls.
E)price falls and quantity falls.

Question 15

If a demand curve and a supply curve can be stated functionally as Q_d = 100 - 5P; and Q_s = 90 + 5P, respectively, then the equilibrium quantity and price (Q, P)would be

A)190; 10.
B)190; 1.
C)95; 1.
D)95; 10
E)1; 95.

Question 16

Consider cars and gasoline. Other things being equal, when the price of cars decreases, the demand for gasoline is likely to

A)decrease because the two goods are complements.
B)remain unchanged because cars and gasoline are two distinct markets.
C)remain unchanged.
D)remain unchanged because cars and gasoline are produced independently of one another.
E)increase because the two goods are complements.

Question 17

The market supply curve for wooden shipping crates would shift to the right

A)if a tax is applied to shipping crates.
B)if technological conditions for the production of crates deteriorates.
C)if a government subsidy for shipping crates is withdrawn.
D)if the prices of inputs fall.
E)if suppliers leave the industry.

Question 18

Which of the following pairs of goods are likely to be substitutes for a large group of consumers?

A)eggs and toast
B)green beans and peas
C)coffee and cream
D)pancakes and syrup
E)wieners and buns

Question 19

If goods X and Y are substitutes and the price of X falls, all other things being equal, the demand curve for Y will

A)shift to the left.
B)not shift at all.
C)shift to the right.
D)be indeterminate.

Question 20

The "law of demand" hypothesizes that, other things being equal,

A)price and demand vary inversely.
B)the lower the price, the greater the demand.
C)price and quantity demanded are positively related.
D)the higher the price, the lower the quantity demanded.
E)the higher the income, the higher the quantity demanded.

Question 21

Assume that apples and oranges are substitute goods. Given the initial supply and demand curves for apples, a reduction in the price of oranges will tend to

A)increase the price of apples.
B)increase the demand for oranges.
C)decrease the price of apples
D)decrease the demand for oranges.
E)increase the demand for apples.

Question 22

Which of the following statements is correct for a market with an upward- sloping supply curve and a downward- sloping demand curve?

A)If the demand curve shifts left and the supply curve shifts left, equilibrium price will fall.
B)If the demand curve shifts right and the supply curve shifts left, equilibrium price will rise.
C)If the demand curve shifts left and the supply curve shifts right, equilibrium price will rise.
D)If the supply curve shifts right and the demand curve remains constant, equilibrium price will rise.
E)If the supply curve shifts left and demand remains constant, equilibrium quantity will rise.

Question 23

Suppose that some resource X is necessary to produce some good Y. If the price of X falls

A)there is a movement along the supply curve of good Y.
B)the demand curve for X shifts to the right.
C)the supply curve of good Y shifts to the right.
D)the supply curve of resource X shifts to the left.
E)the supply curve of good Y is unaffected.

Question 24

A rise in the quantity demanded of lemons can be attributed to a

A)decline in the number of people drinking lemonade.
B)leftward shift in the supply curve of lemons.
C)rightward shift in the supply curve of lemons.
D)cold spell which makes people want less lemonade.
E)decrease in the price of artificial lemon flavouring.

Question 25

Suppose that supply for some good increases and that simultaneously the demand for the same good decreases. The result would be

A)a decrease in P and an indeterminate change in Q.
B)no change in either P or Q.
C)an increase in Q and a decrease in P.
D)a decrease in Q and an indeterminate change in P.
E)an increase in Q and an increase in P.

Question 26

Which of the following best defines quantity demanded?

A)The amount an individual purchases at its current price.
B)The various amounts that a society desires at all relevant prices.
C)The amount an individual purchases at his or her current income.
D)The amount, per time period, that is desired at a given price.
E)The amount, per time period, an individual desires and is able to purchase at the given price.

Question 27

The "law of demand" describes

A)a direct relationship between the price of a good and the quantity of the good demanded per unit of time, ceteris paribus.
B)an inverse relationship between the price of a good and the demand for the good, per unit of time.
C)a direct relationship between the price of a good and the demand for the good.
D)any relationship between quantity demanded and demand for a good.
E)an inverse relationship between the price of a good and the quantity of the good demanded per unit of time, other things being equal.

Question 28

Suppose that the demand curves for goods A, B, and C have the following functional forms:, where Q denotes quantity demanded and P denotes price: Q_A = 120 - 3.5P_A - 6P_B Q_B = 100 - 2P_B + 3P_C Q_C = 1500 - 0.5P_C.
Based on these demand curves, which of the following pairs of goods are known to be substitutes?

A)A and B
B)A and C, and B and C
C)B and C
D)A and C
E)None of the pairs are substitutes.

Question 29

A surplus exists in the market when

A)the quantity demanded exceeds the quantity supplied.
B)supply and demand are equal.
C)the quantity demanded is less than the quantity supplied.
D)the supply curve has shifted to the left.
E)the equilibrium price is too low.

Question 30

A normal good is one

A)for which demand does not vary with household income.
B)that normal people consume.
C)that everyone normally consumes.
D)for which demand varies inversely with household income.
E)for which demand varies directly with household income.

Question 31

With a given upward- sloping supply curve for sirloin steak (a normal good), a rise in household income will cause the

A)equilibrium price to decrease and equilibrium quantity of sirloin steak to increase.
B)equilibrium price and equilibrium quantity of sirloin steak to both increase.
C)equilibrium price and equilibrium quantity of sirloin steak to both decrease.
D)equilibrium price to increase and equilibrium quantity of sirloin steak to decrease.
E)equilibrium price to increase and equilibrium quantity of sirloin steak to remain constant.

Question 32

An equilibrium price is the

A)price that producers want to charge.
B)price in the middle of supply and demand.
C)price that consumers are willing to pay.
D)price at which quantity demanded of the commodity is equal to the quantity supplied.
E)price at which demand for the commodity is equal to supply.

Question 33

The term "quantity supplied" is the amount of a commodity that

A)firms wish to sell at a given price during a given period of time.
B)firms actually sell during a given period of time at a given price.
C)is supplied at a fair market price.
D)is exchanged between firms and consumers during a given period of time at a given price.
E)households wish firms would sell during a given period of time at a given price.

Question 34

Suppose that many coal mines are shut for environmental reasons. This will cause

A)a movement up the supply curve.
B)a decrease in the supply of coal (a leftward shift of the supply curve).
C)no change in the supply curve, only a change in price.
D)an increase in the supply of coal (a rightward shift of the supply curve).
E)a movement down the supply curve.

Question 35

Suppose that the price of wheat has fallen from $3 to $2 per bushel and that the price of newsprint has fallen from $200 to $100 per tonne. The relative price of wheat in terms of newsprint

A)has risen.
B)has fallen.
C)cannot be determined from the above data.
D)is completely unrelated.
E)remained constant.

Question 36

Which of the following events would cause a change in the quantity supplied of some agricultural commodity but would not cause a change in the supply of that same commodity?

A)a change in the number of suppliers of the commodity.
B)a change in the price of substitute goods.
C)a technological change.
D)a change in factor costs.
E)a change in the price of the commodity.

Question 37

An increase in the number of firms wanting to provide accounting services will cause a for accounting services.

A)leftward shift in the supply curve
B)rightward shift in the supply curve
C)leftward shift in the demand curve
D)simultaneous shift of both the demand and supply curves
E)rightward shift in the demand curve

Question 38

A fall in the price of potatoes, which are used in the production of french fries, will

A)lead to an increase in the supply of french fries, causing the supply curve of french fries to shift to the right.
B)lead to a decrease in the supply of french fries, causing the supply curve of french fries to shift to the left.
C)have no effect on the supply of french fries but cause a movement along the supply curve of french fries.
D)have no effect on the supply of french fries.
E)lead to a decrease in the demand for french fries.

Question 39

Consider butter and margarine, which are substitutes. When the price of butter falls, the demand curve for margarine is likely to

A)shift to the left.
B)remain stationary.
C)remain stationary, although its price will rise.
D)remain stationary, although its price will fall.
E)shift to the right.

Question 40

Suppose there is a decrease in the quantity supplied of copper at each price. This change would imply

A)a shift to the left of the supply curve.
B)a shift to the right of the supply curve.
C)a movement down the supply curve.
D)a movement up the supply curve.

Question 41

The positive slope of a supply curve indicates that

A)as price goes up, quantity supplied will increase.
B)as price goes up, quantity supplied will remain constant.
C)as price goes up, quantity supplied will decrease.
D)consumers will want to buy less at higher prices.
E)if the costs of production increase, the quantity supplied will increase.

Question 42

Cars and gasoline are likely to be

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

Question 43

An important assumption underlying a demand schedule is that

A)household tastes rarely change.
B)everything else except the product's price is being held constant.
C)quantity demanded and demand mean the same thing.
D)the numbers are not important; the general relationship between the variables is.
E)income has little significance to household demand.

Question 44

Suppose that in Montreal in December, 2009, 10 000 ski helmets were sold at a price of $60 each. And in Montreal in December, 2010, 20 000 ski helmets were sold at a price of $80 each. One possible explanation for the change is that from 2009 to 2010 the curve for ski helmets shifted to the _ .

A)supply; right
B)demand; left
C)demand; right
D)supply or demand; right
E)supply; left

Question 45

At the market- clearing price for a commodity

A)shifts in the supply or demand curves will not cause price changes.
B)prices will remain unchanged, even if there is excess demand.
C)there will never again be any pressure for prices to change, independent of what happens to demand or supply.
D)the quantity supplied of the commodity equals quantity demanded.
E)there may be excess demand for a product but not excess supply.

Question 46

The supply for some good or service will decrease

A)if the prices of inputs increase.
B)if technology improves.
C)if more suppliers enter the industry.
D)if technology improves and the price of inputs falls.
E)if the prices of inputs fall.

Question 47

Weekend train travel costs less than weekday train travel. If the supply of train service remains the same between weekdays and weekends, then the most likely explanation for this difference in price is that the weekend

A)supply curve is to the right of the weekday supply curve.
B)demand curve is to the left of the weekday demand curve.
C)demand curve is random.
D)supply curve is to the left of the weekday supply curve.
E)demand curve is to the right of the weekday demand curve.

Question 48

To say that the demand curve for movies is negatively sloped means that

A)less quantity will be demanded at higher prices.
B)less quantity will be demanded as preferences change.
C)more quantity will be demanded as consumers' income increases.
D)less quantity will be demanded at lower prices.
E)less quantity will be demanded at the same price.

Question 49

The demand for a given commodity will remain the same with a change in

A)population.
B)the price of the commodity.
C)tastes in favour of the commodity.
D)the distribution of income.
E)average household income.

Question 50

When deriving the market demand curve for a commodity, the only variable(s)that can change is (are)the

A)income of consumers.
B)price of a related commodity.
C)quantity of the commodity demanded.
D)price of the commodity.
E)both C and D.

Question 51

Suppose that the demand curves for goods A, B, and C have the following functional forms:, where Q denotes quantity demanded and P denotes price: Q_A = 120 - 3.5 P_A - 6P_B Q_B = 100 - 2P_B + 3P_C Q_C = 1500 - 0.5P_C.
Based on these demand curves, which of the following pairs of goods are known to be complements?

A)A and C
B)B and C
C)A and B
D)A and C, and B and C
E)None of the pairs are complements.

Question 52

A demand curve is a representation of the relationship, ceteris paribus, between quantity demanded and

A)supply.
B)price.
C)wealth.
D)income.
E)preferences.

Question 53

A variable that is assumed to be constant along an individual's demand curve for good X is the

A)price of good X.
B)quantity of X demanded per unit of time.
C)consumer's real purchasing power.
D)amount of X the individual wishes to purchase.
E)price of a substitute good Y.

Question 54

Ceteris paribus means

A)among other things.
B)other things being equal.
C)knowledge gained before the study of evidence is made.
D)and so forth.
E)in a historical context.

Question 55

Suppose the demand curves for goods A, B, and C have the following functional forms, where Q denotes quantity demanded, P denotes price, and M denotes income: Q_A = 120 - 3.5P_A - 6P_B + 14M Q_B = 100 - 2P_B + 3P_C + 1.1M Q_C = 1500 - 0.5P_C - 300M.
Based on these demand curves, which of the following goods are known to be normal goods?

A)A
B)B
C)C
D)A and B only
E)A, B and C

Question 56

Four of the five statements below contain a stock and a flow. Which statement describes ONLY stock variables OR flow variables?

A)The Canadian Federal government has a debt of approximately $450 billion and an annual deficit of over $25 billion dollars.
B)Nancy spends $400 per month on her credit card and has a balance owing of $2567.
C)Chris earns $1500 per month and has $4 000 in his savings account at the bank.
D)Country X spends an average of $1 million per year for flood relief and has an emergency services fund of $20 million.
E)The Transit Authority of Mytown collects $22 000 in fares per day and has an operating budget of $2 million per year.

Question 57

For a given commodity, quantity demanded can be represented by

A)a demand curve.
B)the price on the vertical axis.
C)a demand schedule.
D)a point on a demand curve.
E)the money value of the stock of the commodity held by households.

Question 58

Which of the following pairs of goods are likely to be complements for a large group of consumers?

A)tea and coffee
B)televisions and radios
C)televisions and DVD players
D)cars and trucks
E)tents and tent- trailers

Question 59

The term "supply" in a particular market refers to

A)the particular quantity supplied at the moment.
B)the quantity actually sold to consumers.
C)the entire relationship between quantity supplied and price.
D)only one point on the supply curve.
E)only one entry in a supply schedule.

Question 60

Consider the following two statements. (1)An increase in the price of eggs will cause a decrease in the demand for eggs. (2)An increase in the price of eggs will cause a decrease in the demand for bacon. In which of these two statements is the term "demand" used correctly?

A)neither statement
B)both statements
C)the first statement only
D)more information is needed
E)the second statement only

Question 61

Given a positively sloped supply curve, when market demand increases

A)the new equilibrium will have a higher price and a smaller quantity.
B)the new equilibrium will have a higher price and a larger quantity.
C)the new equilibrium will have the same price and larger quantity.
D)the new equilibrium will have a lower price and a smaller quantity.
E)the new equilibrium will have a lower price and a greater quantity.

Question 62

Which statement best describes the "law of demand"? Other things being equal, the quantity of tennis rackets demanded will be greater if the

A)price of badminton rackets is higher.
B)number of tennis players is higher.
C)incomes of tennis players are higher.
D)price of tennis rackets is lower.
E)demand for tennis rackets rises.

Question 63

Suppose that the demand and supply curves in the market for carrots have the following functional forms: Q_D = 250 - 4p and Q_S = 10 + p. The equilibrium quantity and price would then be

A)Q = 68, p = 108.
B)Q = 92, p = 48.
C)Q = 58, p = 48.
D)Q = 48, p = 58.
E)Q = 68, p = 98.

Question 64

If tastes change so that a particular style of boots is now considered more appealing, the likely result is

A)a movement down the demand curve.
B)a movement up the demand curve.
C)a shift in the demand curve to the left.
D)a shift in the demand curve to the right.
E)no change in the demand curve.

Question 65

Quantity demanded is a flow variable, which means that it must be expressed

A)in units of the good per week.
B)in units of the good per year.
C)as number of units per period of time.
D)in units of the good per day.
E)as so much at a specific moment in time.

Question 66

An inferior good is one

A)that inferior people consume.
B)that everyone normally consumes.
C)for which demand varies inversely with household income.
D)for which demand does not vary with household income.
E)for which demand varies directly with household income.

Question 67

Consider a negatively sloped demand curve for natural gas. If the supply of natural gas increases, the new equilibrium will have

A)a higher price and a smaller quantity.
B)the same price and larger quantity.
C)a higher price and a larger quantity.
D)a lower price and a greater quantity.
E)a lower price and a smaller quantity.

Question 68

Suppose that a better way to produce a good is discovered, thus lowering production costs for the good. This will cause

A)an increase in supply (a rightward shift of the supply curve).
B)a movement down the supply curve.
C)a movement up the supply curve.
D)a decrease in supply (a leftward shift of the supply curve).
E)no change in the supply curve, only a change in price.

Question 69

If there is no change in the money price of steel during a period of 6 percent inflation, then the

A)relative price of steel has increased.
B)relative price of steel has decreased.
C)absolute price of steel has decreased.
D)absolute price of steel has increased.
E)relative price of steel is equal to the absolute price of steel.

Question 70

Tickets for music concerts that are sold on the Internet are often sold out within minutes and many unsatisfied customers are unable to get tickets. One explanation for this is that

A)concert goers are not rational.
B)the market price for concert tickets may be set below its equilibrium price.
C)CD prices have increased.
D)the market price for concert tickets may be set above its equilibrium price.
E)the market price for concert tickets is at its equilibrium level.

Question 71

Which of the following events would a change in the quantity demanded for some commodity but NOT a change in the demand for that commodity?

A)a change in the price of the commodity.
B)a change in the distribution of income.
C)a change in population.
D)a change in average household income.
E)a change in tastes in favour of the commodity.

Question 72

In which statement is the term "supply" used correctly? (1)An increase in the price of leather will cause a decrease in the supply of leather. (2)An increase in the price of leather will cause a decrease in the supply of leather boots.

A)the second statement only
B)the first statement only
C)both statements
D)neither statement
E)not enough information to tell

Question 73

If a demand curve and a supply curve can be stated functionally as Q_d = 500 - 0.1P and Q_s = 440 + 0.4P, respectively, then the equilibrium quantity and price (Q, P)would be

A)150; 485.
B)488; 120
C)940; 0.4.
D)50; 176.
E)150; 150.

Question 74

Quantity demanded is the

A)total amount of a good that people wish to buy, regardless of price.
B)total amount of a good that purchasers wish to purchase at a given price during a given period of time.
C)product of advertising, and is unrelated to price.
D)entire relationship between desired purchases and possible prices.
E)total amount of a good that is actually purchased during a given period of time.

Question 75

An equilibrium price can be described as

A)one at which there is neither excess demand or supply.
B)the price at which excess demand equals excess supply.
C)an aggregate price.
D)the final price.
E)a regulated price

Question 76

The relative price of a good

A)reflects its price in terms of units of other goods.
B)is its price in terms of money.
C)is equal to the average price of the good over the last 5 years.
D)is a measure of the relative share of the consumer's income devoted to its purchase.
E)is always measured in current dollars.

Question 77

To say that the supply curve is positively sloped means that

A)as price goes up, quantity supplied will remain constant.
B)as price goes up, quantity supplied will increase.
C)households will want to buy less at higher prices.
D)as price goes up, quantity supplied will decrease.
E)if the costs of production increase, the quantity supplied will have to increase also.

Question 78

A change in demand is said to take place when there is a

A)quantity change.
B)shift of the supply curve.
C)movement along the demand curve.
D)shift of the demand curve.
E)price change.

Question 79

In a market for a good or service, the quantities demanded and supplied are

A)a stock variable and a flow variable, respectively.
B)neither stock nor flow variables.
C)both stock variables.
D)both flow variables.
E)a flow variable and a stock variable, respectively.

Question 80

A rightward shift in the supply curve indicates

A)a decrease in the quantity supplied at each price.
B)that more is demanded at each price.
C)that an increase in income results in an increase in the quantity demanded at each price.
D)an increase in the quantity supplied at each price.
E)a shift in the demand curve also (because demand must equal supply).