Deck 3: Demand, Supply, and Market Equilibrium

Question 1

As the price of a product falls, the demand for the product increases, ceteris paribus.

Answer 1

False

Question 2

The Law of Supply states that

A)producers should only produce what they can sell.
B)producers should only sell the items when the price is right.
C)there is a positive relationship between price and quantity supplied, ceteris paribus.
D)producers are legally required to make necessary items available in the marketplace.

Answer 2

there is a positive relationship between price and quantity supplied, ceteris paribus.

Question 3

Figure 3.1
Refer to Figure 3.1, which shows Mollyʹs and Ryanʹs individual demand curves for compact discs per month. Assuming Molly and Ryan are the only consumers in the market, what is the market quantity demanded at a price of $3?

A)6
B)9
C)15
D)20

Answer 3

20

Question 4

The market demand curve

A)shows the relationship between the price of a good and the quantity that all consumers together are willing to buy.
B)is drawn assuming that variables such as income and tastes are variable.
C)is drawn assuming that the number of consumers is variable.
D)is drawn assuming that the selling price is fixed.

Question 5

Suppose that there are only three consumers of a product. At a price of $6 per unit, the first consumer would buy 12 units of the product, the second consumer would buy 8 units, and the third consumer would buy 3 units of the product. If you drew a market demand curve for this product, the quantity demanded at a price of $6 would be

A)23 units.
B)20 units.
C)12 units.
D)11 units.

Question 6

The market demand curve shows the relationship between the price and the quantity demanded by all consumers, everything else being equal.

Question 7

A demand curve is defined as the relationship between

A)the price of a good and the quantity of that good that consumers are willing to buy.
B)the price of a good and the quantity of that good that producers are willing to sell.
C)the income of consumers and the quantity of a good that consumers are willing to buy.
D)the income of consumers and the quantity of a good that producers are willing to sell.

Question 8

A supply curve is defined as the relationship between

A)the price of a good and the quantity that consumers are willing to buy.
B)the price of a good and the quantity that producers are willing to sell.
C)the income of consumers and the quantity of a product that consumers are willing to buy.
D)the income of consumers and the quantity of a product that producers are willing to sell.

Question 9

A change in the quantity demanded of a product is the result of a change in

A)the price of the product.
B)the price of related goods.
C)consumer income.
D)the cost of producing the product.

Question 10

If a competitive market operates perfectly, it relies on

A)the number of people buying goods.
B)the laws of supply and demand.
C)how many products can be produced for sale.
D)how much people are willing to pay for the products.

Question 11

Figure 3.1
Refer to Figure 3.1, which shows Mollyʹs and Ryanʹs individual demand curves for compact discs per month. Assuming Molly and Ryan are the only consumers in the market, what is the market quantity demanded at a price of $9?

A)2
B)4
C)6
D)10

Question 12

Figure 3.1
Refer to Figure 3.1, which shows Mollyʹs and Ryanʹs individual demand curves for compact discs per month. Assuming Molly and Ryan are the only consumers in the market, if the market quantity demanded is 5, the price must be

A)$3.
B)$6.
C)$9.
D)$12.

Question 13

In considering the relationships between price and quantity demanded, ʺ ceteris paribusʺ directs the economist to assume that

A)price increases affect quantity.
B)quantity increases affect prices.
C)neither price nor quantity affect demand.
D)all other variables remain unchanged.

Question 14

When there is a change in the quantity demanded it means that

A)the hours the customer can buy products each day have increased.
B)the number of products in inventory have increased.
C)the quantity a consumer is willing to buy changes when the price changes.
D)the selling price of the products has not changed.

Question 15

On the ʺdemand sideʺ of a market, consumers indicate what they are willing to buy, in what quantity and at what price.

Question 16

The law of demand states that there is a negative relationship between price and quantity demanded, ceteris paribus.

Question 17

The Law of Demand can be explained as

A)a lot of people wanting the same thing.
B)the higher the price, the smaller the quantity demanded, ceteris paribus.
C)people are willing to make limited sacrifices to acquire products.
D)legal reasons people make purchases in the marketplace.

Question 18

A change in quantity supplied of a product is the result of a change in

A)consumer income.
B)the state of production technology.
C)the cost of producing the product.
D)the price of the product.

Question 19

The quantity demanded of a product increases as

A)consumer income rises.
B)the prices of other products fall.
C)the price of the product rises.
D)the price of the product falls.

Question 20

Figure 3.1
Refer to Figure 3.1, which shows Mollyʹs and Ryanʹs individual demand curves for compact discs per month. Assuming Molly and Ryan are the only consumers in the market, if the market quantity demanded is 15, the price must be

A)$0.
B)$6.
C)$9.
D)$15.

Question 21

Figure 3.6
Davidʹs Supply Schedule Celesteʹs Supply Schedule
Refer to Figure 3.6, which shows Davidʹs and Celesteʹs individual supply curves for flower arrangements per week. Assuming David and Celeste are the only producers in the market, what is the market quantity supplied at a price of $20?

A)0
B)100
C)150
D)200

Question 22

As the price of a product rises, the quantity supplied decreases.

Question 23

What happens if the price of a product is below the equilibrium price?

A)The buyers will stop purchasing a ʺcheapʺ product.
B)The producer will lower the price to sell more product.
C)There will be an excess demand for the product.
D)There will be a surplus of the product.

Question 24

Figure 3.6
Davidʹs Supply Schedule Celesteʹs Supply Schedule
Refer to Figure 3.6, which shows Davidʹs and Celesteʹs individual supply curves for flower arrangements per week. Assuming David and Celeste are the only producers in the market, if the market quantity supplied is 350, the price must be

A)$10.
B)$20.
C)$30.
D)$40.

Question 25

In the event of excess supply in the coffee market

A)the price of coffee will increase.
B)the price of coffee will decrease.
C)the supply of coffee will decrease supply will shift to the left)to meet the demand.
D)the demand for coffee will increase demand will shift to the right)to meet the supply.

Question 26

Quantity of Frozen Latte-On-A-Stick Supplied
$\begin{array}{|c|c|c|}\hline \text { Price } & \text { Flo's Supply } & \text { Rita's Supply } \\\hline 1 & 0 & 0 \\\hline 2 & 0 & 3 \\\hline 3 & 4 & 6 \\\hline 4 & 9 & 9 \\\hline 5 & 15 & 12 \\\hline\end{array}$
Table 3.1

-Refer to Table 3.1, which shows Floʹs and Ritaʹs individual supply schedules for frozen latte- on-a-stick. Assuming Flo and Rita are the only suppliers in the market, what is the market quantity supplied at a price of $2?

A)0
B)2
C)3
D)5

Question 27

Figure 3.2
Figure 3.2 illustrates the supply and demand for t-shirts. If the actual price of t-shirts is $7, we would expect that

A)demand will decrease until quantity demanded equals quantity supplied.
B)supply will increase until quantity demanded equals quantity supplied.
C)price will increase until quantity demanded equals quantity supplied.
D)there will be no change since the market is in equilibrium.

Question 28

Quantity of Frozen Latte-On-A-Stick Supplied
$\begin{array}{|c|c|c|}\hline \text { Price } & \text { Flo's Supply } & \text { Rita's Supply } \\\hline 1 & 0 & 0 \\\hline 2 & 0 & 3 \\\hline 3 & 4 & 6 \\\hline 4 & 9 & 9 \\\hline 5 & 15 & 12 \\\hline\end{array}$
Table 3.1

-Refer to Table 3.1, which shows Floʹs and Ritaʹs individual supply schedules for frozen latte-on-a-stick. Assuming Flo and Rita are the only suppliers in the market, what is the market quantity supplied at a price of $1?

A)0
B)1
C)3
D)5

Question 29

Figure 3.2
Figure 3.2 illustrates the supply and demand for t-shirts. If the actual price of t-shirts is $15, we would expect that

A)demand will decrease until quantity demanded equals quantity supplied.
B)supply will increase until quantity demanded equals quantity supplied.
C)price will decrease until quantity demanded equals quantity supplied.
D)there will be no change since the market is in equilibrium.

Question 30

The law of supply states that there is a positive relationship between price and quantity supplied, ceteris paribus.

Question 31

Quantity of Frozen Latte-On-A-Stick Supplied
$\begin{array}{|c|c|c|}\hline \text { Price } & \text { Flo's Supply } & \text { Rita's Supply } \\\hline 1 & 0 & 0 \\\hline 2 & 0 & 3 \\\hline 3 & 4 & 6 \\\hline 4 & 9 & 9 \\\hline 5 & 15 & 12 \\\hline\end{array}$
Table 3.1

-Refer to Table 3.1, which shows Floʹs and Ritaʹs individual supply schedules for frozen latte-on-a-stick. Assuming Flo and Rita are the only suppliers in the market, if the market quantity supplied is 3, the price must be

A)$0.
B)$2.
C)$4.
D)$5.

Question 32

Quantity of Frozen Latte-On-A-Stick Supplied
$\begin{array}{|c|c|c|}\hline \text { Price } & \text { Flo's Supply } & \text { Rita's Supply } \\\hline 1 & 0 & 0 \\\hline 2 & 0 & 3 \\\hline 3 & 4 & 6 \\\hline 4 & 9 & 9 \\\hline 5 & 15 & 12 \\\hline\end{array}$
Table 3.1

-Refer to Table 3.1, which shows Floʹs and Ritaʹs individual supply schedules for frozen latte-on-a-stick. Assuming Flo and Rita are the only suppliers in the market, if the market quantity supplied is 18, the price must be

A)$2.
B)$3.
C)$4.
D)$5.

Question 33

When consumers are willing to buy more than producers are willing to sell

A)there is excess supply of the product in the market.
B)there is excess demand for the product in the market.
C)the market is in equilibrium.
D)the demand curve will shift until the quantity supplied equals the quantity demanded.

Question 34

Figure 3.2
Figure 3.2 illustrates the supply and demand for t-shirts. If the actual price of t-shirts is $15, there is an

A)excess demand of 8 t-shirts.
B)excess supply of 8 t-shirts.
C)excess demand of 10 t-shirts.
D)excess supply of 10 t-shirts.

Question 35

Quantity of Frozen Latte-On-A-Stick Supplied
$\begin{array}{|c|c|c|}\hline \text { Price } & \text { Flo's Supply } & \text { Rita's Supply } \\\hline 1 & 0 & 0 \\\hline 2 & 0 & 3 \\\hline 3 & 4 & 6 \\\hline 4 & 9 & 9 \\\hline 5 & 15 & 12 \\\hline\end{array}$
Table 3.1

-Refer to Table 3.1, which shows Floʹs and Ritaʹs individual supply schedules for frozen latte- on-a-stick. Assuming Flo and Rita are the only suppliers in the market, what is the market quantity supplied at a price of $5?

A)3
B)12
C)15
D)27

Question 36

Figure 3.2
Figure 3.2 illustrates the supply and demand for t-shirts. If the actual price of t-shirts is $7, there is an

A)excess demand of 8 t-shirts.
B)excess supply of 8 t-shirts.
C)excess demand of 10 t-shirts.
D)excess supply of 10 t-shirts.

Question 37

On the ʺsupply sideʺ of a market, producers indicate to consumers what they are willing to sell, in what quantity and at what price.

Question 38

Figure 3.2
Figure 3.2 illustrates the supply and demand for t-shirts. If the actual price of t-shirts is $10, we would expect that

A)demand will decrease until quantity demanded equals quantity supplied.
B)supply will increase until quantity demanded equals quantity supplied.
C)price will increase until quantity demanded equals quantity supplied.
D)there will be no change since the market is in equilibrium.

Question 39

Figure 3.6
Davidʹs Supply Schedule Celesteʹs Supply Schedule
Refer to Figure 3.6, which shows Davidʹs and Celesteʹs individual supply curves for flower arrangements per week. Assuming David and Celeste are the only producers in the market, what is the market quantity supplied at a price of $30?

A)200
B)250
C)300
D)350

Question 40

Figure 3.6
Davidʹs Supply Schedule Celesteʹs Supply Schedule
Refer to Figure 3.6, which shows Davidʹs and Celesteʹs individual supply curves for flower arrangements per week. Assuming David and Celeste are the only producers in the market, if the market quantity supplied is 50, the price must be

A)$0.
B)$10.
C)between $10 and $20.
D)$30.

Question 41

Figure 3.3
Figure 3.3 illustrates the demand for tacos. Assume that tacos and burritos are substitutes. A decrease in the price of burritos would bring about a movement from

A)point a to point c.
B)point c to point b.
C)D2 to D0.
D)D1 to D2.

Question 42

Figure 3.3
Figure 3.3 illustrates the demand for tacos. An increase in the demand for tacos is represented by the movement from

A)point a to point b.
B)point c to point b.
C)D2 to D1.
D)D0 to D1.

Question 43

If the quantity of a product demanded is greater than the quantity of a product supplied, there is pressure in the market to push the price downward.

Question 44

Suppose that a market for a product is in equilibrium at a price of $5 per unit. At any price above $5 per unit

A)there will be an excess demand for the product.
B)there will be an excess supply of the product.
C)the quantity supplied of the product will be less than the quantity demanded of that product.
D)there will be a shortage of that product.

Question 45

Figure 3.3
Figure 3.3 illustrates the demand for tacos. An increase in price of tacos would bring about a movement from

A)point a to point c.
B)point c to point a.
C)D2 to D0.
D)D0 to D1.

Question 46

Figure 3.3
Figure 3.3 illustrates the demand for tacos. Assume tacos are an inferior good. An increase in income would bring about a movement from

A)point a to point b.
B)point c to point b.
C)D2 to D1.
D)D0 to D1.

Question 47

Excess supply in an unregulated market will cause the price of a product to fall.

Question 48

Suppose that the quantity of cars demanded exceeds the quantity of cars supplied. We would expect that

A)the price of cars will increase.
B)the price of cars will decrease.
C)the supply will increase supply will shift to the right)to meet the demand.
D)the demand will decrease demand will shift to the left)to meet the supply.

Question 49

Figure 3.3
Figure 3.3 illustrates the demand for tacos. Assume tacos are a normal good. An increase in income would bring about a movement from

A)point a to point b.
B)point c to point b.
C)D2 to D1.
D)D0 to D1.

Question 50

Suppose that the quantity of cars supplied exceeds the quantity of cars demanded. We would expect that

A)the price of cars will increase.
B)the price of cars will decrease.
C)the supply will increase supply will shift to the right)to meet the demand.
D)the demand will decrease demand will shift to the left)to meet the supply.

Question 51

Figure 3.3
Figure 3.3 illustrates the demand for tacos. Assume that tacos and beer are complements. A decrease in the price of beer would bring about a movement from

A)point a to point c.
B)point c to point a.
C)D2 to D0.
D)D0 to D2.

Question 52

The government sometimes creates an excess demand for a product by setting a maximum price at which the product may be sold to consumers. This is sometimes called a

A)price ceiling.
B)price floor.
C)tax.
D)subsidy.

Question 53

Governments sometime create an excess demand for a product by setting a maximum price that is less than the equilibrium price, resulting in a permanent excess demand for the product. This is known as a price floor.

Question 54

Governments sometime create an excess supply of a product by setting a minimum price that is greater than the equilibrium price, resulting in a permanent excess supply of the product. This is known as a price ceiling.

Question 55

Figure 3.3
Figure 3.3 illustrates the demand for tacos. An increase in the number of consumers in the market would bring about a movement from

A)point a to point b.
B)point c to point a.
C)D2 to D1.
D)D0 to D2.

Question 56

Figure 3.3
Figure 3.3 illustrates the demand for tacos. Assume that tacos and beer are complements. An increase in the price of beer would bring about a movement from

A)point a to point b.
B)point c to point b.
C)D2 to D1.
D)D0 to D2.

Question 57

A government sometimes creates an excess supply of a product by setting a minimum price at which the product may be sold to consumers. This is sometimes called a

A)price ceiling.
B)price floor.
C)tax.
D)subsidy.

Question 58

Figure 3.3
Figure 3.3 illustrates the demand for tacos. A decrease in the demand for tacos is represented by the movement from

A)point a to point b.
B)point c to point b.
C)D2 to D1.
D)D0 to D1.

Question 59

Excess demand in an unregulated market will cause the price of a product to fall.

Question 60

Suppose that a market for a product is in equilibrium at a price of $3 per unit. At any price below $3 per unit

A)there will be an excess demand for the product.
B)there will be an excess supply of the product.
C)the quantity demanded of the product will be less than the quantity supplied of that product.
D)there will be a surplus of that product.

Question 61

Landon demands more sushi as his income increases. From this, we can conclude that, for Landon

A)sushi is a normal good.
B)sushi is an inferior good.
C)sushi is a complementary good.
D)sushi is a substitute good.

Question 62

Assume that tortilla chips and salsa are complements. When the price of tortilla chips decreases

A)the demand for salsa increases.
B)the demand for salsa decreases.
C)the supply of salsa decreases.
D)the demand for tortilla chips decreases.

Question 63

Suppose that in 2009, 4 million plasma TVs were purchased at $1,600 each, while in 2010, 3 million plasma TVs were purchased at $1,350 each. What might have caused this change?

A)The price of LCD TVs a substitute for plasma TVs)fell.
B)The price of LCD TVs a substitute for plasma TVs)rose.
C)Plasma TV manufacturing technology increased.
D)Plasma TV manufacturing technology decreased.

Question 64

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?

A)The price of tea a substitute for cafe lattes)fell.
B)The price of tea a substitute for cafe lattes)rose.
C)The price of coffee beans an input of production of cafe lattes)rose.
D)The price of coffee beans an input of production of cafe lattes)fell.

Question 65

Suppose that a product benefits from a successful advertising campaign. The result is that

A)the demand for the product increases.
B)the demand for the product decreases.
C)the supply of the product increases.
D)the supply of the product decreases.

Question 66

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

A)demand increased.
B)demand decreased.
C)supply increased.
D)supply decreased.

Question 67

Figure 3.3
Figure 3.3 illustrates the demand for tacos. A decrease in price of tacos would bring about a movement from

A)point a to point c.
B)point c to point a.
C)D2 to D0.
D)D0 to D2.

Question 68

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

A)normal
B)inferior
C)complementary
D)substitute

Question 69

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

A)normal
B)inferior
C)complementary
D)substitute

Question 70

Assume that coffee and tea are substitutes. When the price of coffee increases

A)the demand for tea decreases.
B)the demand for tea increases.
C)the supply of tea increases.
D)the supply of tea decreases.

Question 71

Figure 3.3
Figure 3.3 illustrates the demand for tacos. A successful advertising campaign to sell tacos would bring about a movement from

A)point a to point b.
B)point c to point b.
C)D2 to D1.
D)D0 to D1.

Question 72

When the price of almonds falls

A)the demand for almonds decreases, ceteris paribus.
B)the demand for almonds increases, ceteris paribus.
C)the quantity of almonds demanded decreases, ceteris paribus.
D)the quantity of almonds demanded increases, ceteris paribus.

Question 73

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

A)normal
B)inferior
C)complementary
D)substitute

Question 74

When the price of apples goes up

A)the demand for apples will decrease, ceteris paribus.
B)the demand for apples will increase, ceteris paribus.
C)the quantity of apples demanded will decrease, ceteris paribus.
D)the quantity of apples demanded will increase, ceteris paribus.

Question 75

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

A)normal
B)inferior
C)complementary
D)substitute

Question 76

Figure 3.3
Figure 3.3 illustrates the demand for tacos. If people expect the price of tacos to decrease in the near future, this would most likely bring about a movement from

A)point a to point b.
B)point c to point a.
C)D2 to D0.
D)D0 to D1.

Question 77

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

A)the current demand for the product increases.
B)the current demand for the product decreases.
C)the current supply of the product increases.
D)the current supply of the product decreases.

Question 78

Suppose that consumers expect that the price of a product will increase in the future. The result is that

A)the current demand for the product increases.
B)the current demand for the product decreases.
C)the current supply of the product increases.
D)the current supply of the product decreases.

Question 79

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

A)not change.
B)decrease.
C)increase.
D)depend on supply.

Question 80

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

A)price increases.
B)price decreases.
C)price remains unchanged.
D)quantity decreases.