Deck 3: B: Demand, Supply, and Market Equilibrium

Question 1

A price floor in a competitive market will result in persistent shortages of a product.

Answer 1

False

Question 2

If demand increases and supply simultaneously decreases, equilibrium price will rise.

Answer 2

True

Question 3

The higher a price floor is above the equilibrium price, the greater will be the surplus output.

Answer 3

True

Question 4

If consumer tastes or preferences for a product increase, the demand for the product will tend to decrease.

Question 5

If the supply of a product decreases and demand increases, the equilibrium price and quantity will increase.

Question 6

A decrease in the prices of resources used in producing a product will increase the supply of the product.

Question 7

Surpluses drive market prices up; shortages drive them down.

Question 8

An increase in supply and demand will lead to an increase in the equilibrium price and an indeterminate change in the equilibrium quantity.

Question 9

If two goods are substitutes in consumption, a decline in the price of one will cause an increase in the demand for the other.

Question 10

If two goods are complements (in consumption), a decline in the price of one will cause an increase in the demand for the other.

Question 11

The development of a new production technique that lowers the cost of producing product X will shift the supply curve of product X to the right.

Question 12

A surplus indicates that the quantity demanded is greater than the quantity supplied at that price.

Question 13

The law of demand states that, ceteris paribus, there is an inverse relationship between the price of a good and the quantity demanded of the good.

Question 14

A price fixed above the equilibrium price of a product will cause a shortage of that product.

Question 15

An increase in the supply of product X, with demand held constant, will increase the price of product X.

Question 16

The further a ceiling price is below the equilibrium price, the smaller will be the shortage of the product.

Question 17

An increase in consumer incomes will cause a decrease in the demand for an inferior good.

Question 18

A price fixed below the equilibrium price of a product will cause a shortage of that product.

Question 19

The law of supply states that, ceteris paribus, there is an inverse relationship between the price of a good and the quantity supplied of the good.

Question 20

A ceiling price in a competitive market will result in persistent surpluses of a product.

Question 21

The law of demand is illustrated by a demand curve that is:

A)vertical.
B)horizontal.
C)upward sloping.
D)downward sloping.

Question 22

When product prices change, consumers are inclined to purchase larger amounts of the now cheaper products and less of the now dearer products.This describes:

A)the cost effect.
B)the price effect.
C)the income effect.
D)the substitution effect.

Question 23

When the price of one fruit increases, consumers buy more of another fruit.This situation is an illustration of:

A)the income effect.
B)the substitution effect.
C)diminishing marginal utility.
D)the rationing function of prices.

Question 24

A result of a fall in the price of gasoline, consumers buy more gasoline and take more driving vacations.This situation is an illustration of:

A)the income effect.
B)the substitution effect.
C)diminishing marginal utility.
D)the demand for inferior goods.

Question 25

When the price of a product increases, a consumer is able to buy less of it with a given money income.This describes:

A)the cost effect.
B)the inflationary effect.
C)the income effect.
D)the substitution effect.

Question 26

During the 1970s the price of oil rose dramatically, which in turn caused the price of coal to increase.This can best be explained by saying that oil and coal are:

A)complementary goods and the higher price for oil increased the demand for coal.
B)substitute goods and the higher price for oil increased the demand for coal.
C)complementary goods and the higher price for oil decreased the supply of coal.
D)substitute goods and the higher price for oil decreased the supply of coal.

Question 27

Graphically, the market demand curve is:

A)steeper than any individual demand curve which comprises it.
B)greater than the sum of the individual demand curves.
C)the horizontal sum of individual demand curves.
D)the vertical sum of individual demand curves.

Question 28

One reason why the quantity demanded of a good increases when its price falls is that the:

A)lower price shifts the supply curve to the left.
B)lower price shifts the demand curve to the left.
C)lower price shifts the demand curve to the right.
D)lower price increases the real incomes of buyers, enabling them to buy more.

Question 29

The minimum wage imposes a legal floor under the wage of the least skilled worker.

Question 30

As a result of a decrease in the price of hamburgers, consumers buy more hamburgers and more T-bone steak.This is an illustration of:

A)irrational consumer behaviour.
B)changing tastes and preferences.
C)the substitution effect.
D)the income effect.

Question 31

Which of the following is true of a demand curve?

A)It shows the relationship between price and quantity demanded.
B)It indicates the quantity demanded at each of a series of possible prices during a specified time period.
C)It is downward sloping.
D)All of the choices are correct.

Question 32

An increase in the price of a product will reduce the amount of it purchased because:

A)supply curves are upsloping.
B)the higher price means that real incomes have risen.
C)consumers will substitute other products for the one whose price has risen.
D)consumers substitute relatively high-priced for relatively low-priced products.

Question 33

When the price of a product falls, the purchasing power of our money income rises and thus permits us to purchase more of the product.This statement describes:

A)an inferior good.
B)the rationing function of prices.
C)the substitution effect.
D)the income effect.

Question 34

The demand curve shows the relationship between:

A)money income and quantity demanded.
B)price and production costs.
C)price and quantity demanded.
D)consumer tastes and the quantity demanded.

Question 35

Economists use the term "demand" as:

A)a particular price-quantity combination on a stable demand curve.
B)the total amount spent on a particular commodity over a stipulated time period.
C)an upsloping line on a graph which relates consumer purchases and product price.
D)a schedule of various combinations of market prices and amounts demanded.

Question 36

As a result of a decrease in the price of a hamburger, consumers buy more hamburgers and fewer frankfurters.This is an illustration of:

A)consumer sovereignty.
B)the income effect.
C)the substitution effect.
D)changing tastes and preferences.

Question 37

The law of demand states that:

A)price and quantity demanded are inversely related.
B)the larger the number of buyers in a market, the lower will be product price.
C)price and quantity demanded are directly related.
D)consumers will buy more of a product at high prices than at low prices.

Question 38

The income and substitution effects account for:

A)the upward sloping supply curve.
B)the downward sloping demand curve.
C)movements along a given supply curve.
D)the "other things equal" assumption.

Question 39

When the price of a product rises, consumers shift their purchases to other products whose prices are now relatively lower.This statement describes:

A)an inferior good.
B)complementary goods.
C)the substitution effect.
D)the income effect.

Question 40

The horizontal axis of a graph which shows a market demand curve indicates the:

A)prices at which various levels of output can be sold.
B)number of consumers who are in the market for this product.
C)various quantities of output at which the market will be cleared.
D)quantities which consumers will be willing and able to buy at various prices.

Question 41

By an "increase in demand" we mean:

A)that product price has fallen so consumers move down to a new point on the demand curve.
B)the quantity demanded at each price in a set of prices is greater.
C)the quantity demanded at each price in a set of prices is smaller.
D)none of the above.

Question 42

When economists say that the demand for a product has increased, they mean that:

A)consumers are now willing to purchase more of this product at each possible price.
B)the product has become particularly scarce for some reason.
C)the product price has fallen and as a consequence consumers are buying a larger quantity of the product.
D)the demand curve has shifted to the left.

Question 43

An inferior good is:

A)one whose demand curve will shift rightward as incomes rise.
B)one whose price and quantity demanded varies directly.
C)one which has not been approved by the federal Ministry of Agriculture.
D)one whose demand curve will shift leftward as income rise.

Question 44

Refer to the diagram, which shows three demand curves for coffee.Which of the following would cause the change in the demand for coffee illustrated by the shift from D₁ to D₂?

A)a decrease in the price of tea
B)an increase in consumer incomes
C)an increase in the price of sugar
D)a technological improvement in the production of coffee

Question 45

An economist predicts that in a bicycle company, other things equal, a rise in consumer incomes will increase the demand for bicycles.This prediction is based on the assumption that:

A)there are many goods which are substitutes for bicycles.
B)there are many goods which are complementary to bicycles.
C)there are few goods which are substitutes for bicycles.
D)bicycles are normal goods.

Question 46

If consumers are willing to pay a higher price than previously for each level of output, we can say that there has occurred:

A)a decrease in demand.
B)an increase in demand.
C)a decrease in supply.
D)an increase in supply.

Question 47

Graphically, the horizontal sum of all individual demand curves is known as:

A)consumers' tastes and preferences.
B)the market demand curve.
C)the equilibrium price.
D)consumer sovereignty.

Question 48

Which of the following would usually be an inferior good?

A)French wines
B)generic beer
C)theatre tickets
D)steak

Question 49

A shift to the right in the demand curve for product A can be most reasonably explained by saying that:

A)consumer incomes have declined and they now want to buy less of A at each possible price.
B)the price of A has increased and, as a result, consumers want to purchase less of it.
C)consumer preferences have changed in favour of A so that they now want to buy more at each possible price.
D)the price of A has declined and, as a result, consumers want to purchase more of it.

Question 50

An "increase in demand" means that:

A)given supply, the price of the product can be expected to decline.
B)the demand curve has shifted to the right.
C)price has declined and consumers therefore want to purchase more of the product.
D)the demand curve has shifted to the left.

Question 51

The table below shows the demand schedule for three individual buyers purchasing bushels of wheat.Assume that there are three buyers in the market for wheat (data are hypothetical). Refer to the table above.If there were 1,500 buyers with demand schedules similar to the demand schedules for each of the three buyers in the table above, then the market demand for wheat at $5 will be:

A)8,500 bushels.
B)12,000 bushels.
C)18,500 bushels.
D)26,000 bushels.

Question 52

A market demand schedule for a product indicates that:

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

Question 53

A normal good is one:

A)for which quantity demanded remains the same even as price increases.
B)for which quantity supplied falls as price increases.
C)for which demand increases when price decreases.
D)for which demand increases when income increases.

Question 54

The table below shows three individual buyers' demand for wheat.Assume that there are three buyers in the market for wheat (data are hypothetical). Refer to the table above.At a price of $6, the market demand for wheat is:

A)17 bushels.
B)24 bushels.
C)37 bushels.
D)49 bushels.

Question 55

An inferior good is one:

A)that doesn't work.
B)that costs too much.
C)that won't be purchased at any price.
D)for which demand increases as income decreases.

Question 56

In constructing a stable demand curve for product X:

A)consumer preferences are allowed to vary.
B)the prices of other goods are assumed to be constant.
C)money incomes are allowed to vary.
D)the supply curve of product X is assumed to be fixed.

Question 57

If product Y is an inferior good, an increase in consumer incomes will:

A)result in a surplus of product Y.
B)not affect the sales of product Y.
C)shift the demand curve for product Y to the left.
D)shift the demand curve for product Y to the right.

Question 58

In presenting the notion of a demand curve economists presume that the most important variable in determining the quantity demanded is:

A)the price of the product itself.
B)consumer income.
C)the prices of related goods.
D)consumer tastes.

Question 59

Which of the following is most likely to be an inferior good?

A)fur coats
B)Porsches
C)used clothing
D)steak

Question 60

The table below shows three individual buyers' demand for wheat.Assume that there are three buyers in the market for wheat (data are hypothetical). Refer to the table above.The market demand for wheat is:

A)17 bushels at $6 and 37 bushels at $5.
B)24 bushels at $5 and 52 bushels at $4.
C)37 bushels at $4 and 52 bushels at $3.
D)52 bushels at $5 and 37 bushels at $6.

Question 61

If the demand curve for product B shifts to the right as the price of product A declines, it can be concluded that:

A)both A and B are inferior goods.
B)A is a superior good and B is an inferior good.
C)A is an inferior good and B is a superior good.
D)A and B are complementary goods.

Question 62

If the demand for a normal good (for example, steak) shifts to the left, the most likely reason is that:

A)consumer incomes have fallen.
B)cattle production has declined.
C)the price of steak has risen.
D)the price of cattle feed has gone up.

Question 63

If an increase in consumer incomes causes the demand curve for product Z to shift to the left, then it can be said that product Z is a(n):

A)normal good.
B)luxury good.
C)inferior good.
D)inexpensive good.

Question 64

Refer to the above diagram, which shows three demand curves for coffee.Which of the following would cause the change in the demand for coffee illustrated by the shift from D₁ to D₃?

A)a decrease in the price of tea
B)an increase in consumer incomes
C)a decrease in the price of sugar
D)a technological improvement in the production of coffee

Question 65

For some commodities, purchases tend to decrease as the buyer's income increases.Such commodities are known as:

A)common goods.
B)inferior goods.
C)inverse goods.
D)normal goods.

Question 66

If the price of product L increases, the demand curve for close-substitute product J will:

A)shift downward toward the horizontal axis.
B)shift to the left.
C)shift to the right.
D)remain unchanged.

Question 67

Which of the following will cause the demand curve for product A to shift to the left?

A)population growth which causes an expansion in the number of persons consuming A
B)an increase in money income if A is a normal good
C)a decrease in the price of complementary product C
D)an increase in money income if A is an inferior good

Question 68

If L and M are complementary goods, an increase in the price of L will result in:

A)an increase in the sales of L.
B)no change in either the price or sales of M.
C)a decrease in the sales of M.
D)an increase in the sales of M.

Question 69

If the price of K declines, the demand curve for the complementary product J will:

A)shift to the left.
B)decrease.
C)shift to the right.
D)remain unchanged.

Question 70

An increase in consumer incomes will:

A)increase the demand for an inferior good.
B)increase the supply of an inferior good.
C)increase the demand for a normal good.
D)decrease the supply of a normal good.

Question 71

Which factor will increase the demand for a product?

A)an unfavourable report on the value of the product
B)an increase in the price of a substitute product
C)an increase in the price of a complementary product
D)a decrease in the number of buyers

Question 72

For most commodities, purchases tend to rise with increases in buyers' incomes, and fall with decreases in buyers' incomes.Such commodities are known as:

A)inferior goods.
B)direct goods.
C)average goods.
D)normal goods.

Question 73

If consumer incomes increase, the demand for product X:

A)will necessarily remain unchanged.
B)may shift either to the right or left.
C)will necessarily shift to the right.
D)will necessarily shift to the left.

Question 74

If Z is an inferior good, a decrease in money income will shift the:

A)supply curve for Z to the left.
B)supply curve for Z to the right.
C)demand curve for Z to the left.
D)demand curve for Z to the right.

Question 75

Assume the demand curve for product X shifts to the right.This might be caused by:

A)a decline in income if X is an inferior good.
B)a decline in the price of Z if X and Z are substitute goods.
C)a change in consumer tastes which is unfavourable to X.
D)an increase in the price of Y if X and Y are complementary goods.

Question 76

If X is a normal good, a rise in money income will shift the:

A)supply curve for X to the left.
B)supply curve for X to the right.
C)demand curve for X to the left.
D)demand curve for X to the right.

Question 77

The demand for most products varies directly with changes in consumer incomes.Such products are known as:

A)complementary goods.
B)competitive goods.
C)inferior goods.
D)normal goods.

Question 78

Blu Ray players and Blu Ray discs are:

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

Question 79

If two goods are complements:

A)they are consumed jointly.
B)an increase in the price of one will reduce the demand for the other.
C)a decrease in the price of one will increase the demand for the other.
D)all of the above will be true.

Question 80

A normal good is defined as one:

A)whose amount demanded will increase as its price decreases.
B)whose amount demanded will increase as its price increases.
C)whose demand curve will shift leftward as incomes rise.
D)the consumption of which varies directly with incomes.