Deck 3: Where Prices Come From: the Interaction of Demand and Supply

Question 1

A ________ demand curve for shampoo would be caused by a change in the price of shampoo.

A)rightward shift of the
B)leftward shift of the
C)movement along the
D)positively sloped

Answer 1

movement along the

Question 2

The substitution effect of a price change refers to

A)the change in quantity demanded that results from a change in price making a good more or less expensive relative to other goods that are substitutes.
B)the shift of a demand curve when the price of a substitute good changes.
C)the movement along the demand curve due to a change in purchasing power brought about by the price change.
D)the shift in the demand curve due to a change in purchasing power brought about by the price change.

Answer 2

the change in quantity demanded that results from a change in price making a good more or less expensive relative to other goods that are substitutes.

Question 3

The market for tablet computers has become very competitive.The increase in competition in this market is an example of how the market responds to

A)decreases in the price of desktop computers (a substitute for the product).
B)increases in income.
C)changes in population.
D)changes in consumer tastes.

Answer 3

changes in consumer tastes.

Question 4

Table 3-1

Refer to Table 3-1.The table above shows the demand schedules for Kona coffee of two individuals (Luke and Ravi)and the rest of the market.If the price of Kona coffee rises from $4 to $5,the market quantity demanded would

A)decrease by 35 lb.
B)increase by 115 lb.
C)increase by 35 lb.
D)decrease by 115 lb.

Question 5

Which of the following will not shift the demand curve for a good?

A)an increase in population
B)an increase in the price of the good
C)a decrease in the price of a substitute good
D)an increase in consumer incomes

Question 6

The law of demand implies,holding everything else constant,that as the price of yogurt

A)increases,the demand for yogurt will increase.
B)increases,the quantity of yogurt demanded will decrease.
C)decreases,the quantity of yogurt demanded will decrease.
D)decreases,the demand for yogurt will increase.

Question 7

If the price of pork rinds falls,the substitution effect due to the price change will cause

A)an increase in the demand for pork rinds.
B)an increase in the demand for corn chips,a substitute for pork rinds.
C)an increase in the quantity of pork rinds demanded.
D)a decrease in the quantity of pork rinds demanded.

Question 8

A change in which variable will change the market demand for a product?

A)the price of the product
B)expected future prices
C)the number of firms in the market
D)the quantity supplied of the product

Question 9

An ________ is represented by a rightward shift of the demand curve while an ________ is represented by a movement along a given demand curve.

A)increase in demand; decrease in demand
B)increase in demand; increase in quantity demanded
C)decrease in demand; decrease in quantity demanded
D)increase in quantity demanded; increase in demand

Question 10

The phrase "demand has increased" means that

A)a demand curve has shifted to the left.
B)there has been an upward movement along a demand curve.
C)there has been a downward movement along a demand curve.
D)a demand curve has shifted to the right.

Question 11

If a decrease in income leads to in a decrease in the demand for ice cream,then ice cream is

A)a normal good.
B)a neutral good.
C)a complement.
D)a necessity.

Question 12

Holding everything else constant,a decrease in the price of GPS systems will result in

A)a decrease in the quantity of GPS systems demanded.
B)an increase in the demand for GPS systems.
C)a decrease in the supply of GPS systems.
D)an increase in the quantity of GPS systems demanded.

Question 13

If you are considering buying either an Apple iPad or a Samsung Galaxy Tab,and you choose the Samsung only because the price is lower,then you consider

A)the iPad and the Galaxy Tab to be complements.
B)the iPad and the Galaxy Tab to be substitutes.
C)the iPad to be a normal good and the Galaxy Tab to be an inferior good.
D)the iPad to be an inferior good and Galaxy Tab to be a normal good.

Question 14

By drawing a demand curve with price on the vertical axis and quantity on the horizontal axis,economists assume that the most important determinant of the demand for a good is

A)consumer income.
B)consumer tastes and preferences.
C)the price of the good.
D)the quality of the good.

Question 15

The income effect of a price change results in a

A)shift of the demand curve when income changes.
B)movement along the demand curve due to a change in relative prices.
C)shift of the demand curve due to a change in purchasing power brought about by the price change.
D)movement along the demand curve due to a change in purchasing power brought about by the price change.

Question 16

Table 3-1

Refer to Table 3-1.The table above shows the demand schedules for Kona coffee of two individuals (Luke and Ravi)and the rest of the market.At a price of $6,the quantity demanded in the market would be

A)36 lb.
B)68 lb.
C)89 lb.
D)123 lb.

Question 17

If a decrease in income leads to an increase in the demand for macaroni,then macaroni is

A)an inferior good.
B)a neutral good.
C)a necessity.
D)a normal good.

Question 18

The ________ effect of a price change refers to the impact of a change in the price of a good on a consumer's purchasing power.

A)income
B)substitution
C)demographics
D)ceteris paribus

Question 19

A demand curve shows the relationship between

A)the price of a product and the quantity of the product demanded.
B)the amount of a product sellers are willing to sell at a particular price and the amount consumers are willing to buy at that price.
C)the quantity that consumers are willing and able to buy and the quantity that sellers are willing and able to offer.
D)the price of a produce and the demand for the product.

Question 20

If,in response to a decrease in the price of coffee,the quantity demanded of coffee increases,economists would describe this as

A)an increase in demand.
B)an increase in quantity demanded.
C)a change in consumer income.
D)an increase in consumers' taste for coffee.

Question 21

According to a recent study,"Stricter college alcohol policies,such as raising the price of alcohol,or banning alcohol on campus,decrease the number of students who use marijuana." On the basis of this information,how would you describe alcohol and marijuana?

A)The two goods are substitutes in consumption.
B)There is no relationship between the two goods.
C)The two goods are complements in consumption.
D)They are both luxury goods.

Question 22

If the price of propane-fueled gas grills was to decrease,then

A)the demand for propane would decrease.
B)the demand for propane would increase.
C)the quantity of propane demanded would increase.
D)the quantity of propane demanded would decrease.

Question 23

Figure 3-1
Refer to Figure 3-1.An increase in the price of a complement would be represented by a movement from

A)A to B.
B)B to A.
C)D₁ to D₂.
D)D₂ to D₁.

Question 24

Buyers scrambled to secure stocks of Australian wool following a forecast of an 11 percent decline in wool production.What happens in the Australian wool market as a result of this announcement?

A)The demand curve for Australian wool shifts to the left in anticipation of higher prices in the future.
B)The demand curve for Australian wool shifts to the right in anticipation of higher prices in the future.
C)The quantity of Australian wool demanded increases in anticipation of higher prices in the future.
D)The quantity of Australian wool demanded decreases in anticipation of lower quantities in the future.

Question 25

Several studies have shown promising links between green tea consumption and cancer prevention.How does this affect the market for green tea?

A)The quantity of green tea demanded increases because of a change in tastes in favor of green tea.
B)The green tea demand curve shifts to the right because of a change in tastes in favor of green tea.
C)The green tea demand curve shifts to the left because this new information will increase the price of green tea.
D)The quantity of green tea demanded decreases because this new information will increase the price of green tea.

Question 26

Technological advancements have led to lower prices and an increase in the sale of color laser printers.How does this affect the market for laser printer ink cartridges?

A)The demand curve for laser printer ink cartridges shifts to the right.
B)The demand curve for laser printer ink cartridges shifts to the left.
C)The quantity of laser printer ink cartridges demanded increases.
D)The quantity of laser printer ink cartridges demanded decreases.

Question 27

Suppose that when the price of hamburgers increases,the Ruiz family increases their purchases of hot dogs.To the Ruiz family,

A)hamburgers and hot dogs are complements.
B)hamburgers and hot dogs are inferior goods.
C)hamburgers and hot dogs are normal goods.
D)hamburgers and hot dogs are substitutes.

Question 28

Figure 3-1
Refer to Figure 3-1.If the product represented is a normal good,an increase in income would be represented by a movement from

A)A to B.
B)B to A.
C)D₁ to D₂.
D)D₂ to D₁.

Question 29

How has the growing popularity of factory outlet stores affected the market for clothing at retail department stores?

A)the demand curve for clothing at retail department stores shifts to the right.
B)the demand curve for clothing at retail department stores shifts to the left.
C)the supply curve for clothing at retail department stores shifts to the right.
D)the supply curve for clothing at retail department stores shifts to the left.

Question 30

The demand for medical services in the United States is expected to increase in upcoming years because

A)the fraction of people over the age of 65 is increasing.
B)medical services are becoming less expensive.
C)the baby boom generation is finally lowering the fraction of people over the age of 50.
D)foreign nationals are expected to flock to the United States for medical care once the takes over the health care industry.

Question 31

During the recession of 2007-2009,several casual dining restaurants experienced a drop in business as many consumers chose to become more in spending their declining incomes.The decrease in demand due to falling income indicates that meals sold in casual restaurants are considered

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

Question 32

Figure 3-1
Refer to Figure 3-1.An increase in the price of the product would be represented by a movement from

A)A to B.
B)B to A.
C)D₁ to D₂.
D)D₂ to D₁.

Question 33

During the recession of 2007-2009,Subway experienced increased sales.This increase in demand for food such as a Subway sandwich indicates that Subway sandwiches are inferior goods,which in economic terms means

A)the Subway sandwich is of low quality.
B)the Subway sandwich is not as large as it used to be.
C)competitors' sandwiches,such as those from Quiznos,taste better than Subway sandwiches.
D)the demand for the Subway sandwich increases when income decreases.

Question 34

In September,buyers of silver expect that the price of silver will rise in October.What happens in the silver market in September,holding all else constant?

A)The quantity demanded decreases.
B)The demand curve shifts to the left.
C)The demand curve shifts to the right.
D)The quantity demanded increases.

Question 35

In January,buyers of gold expect that the price of gold will fall in February.What happens in the gold market in January,holding everything else constant?

A)The demand curve shifts to the right.
B)The quantity demanded increases.
C)The quantity demanded decreases
D)The demand curve shifts to the left.

Question 36

Figure 3-1
Refer to Figure 3-1.A decrease in the expected future price of the product would be represented by a movement from

A)A to B.
B)B to A.
C)D₁ to D₂.
D)D₂ to D₁.

Question 37

Suppose that when the price of ice cream increases,Liza decreases her purchase of hot fudge.To Liza,

A)ice cream and hot fudge are complements.
B)ice cream and hot fudge and substitutes.
C)ice cream and hot fudge are normal goods.
D)ice cream is a normal good and hot fudge is an inferior good.

Question 38

Factory incentives on cell phones have encouraged consumers to upgrade their phones.How does this affect the market for bluetooth headsets?

A)The quantity of bluetooth headsets demanded increases.
B)The quantity of bluetooth headsets demanded decreases.
C)The demand for bluetooth headsets increases.
D)The demand for bluetooth headsets decreases.

Question 39

If the price of gasoline increases,what will be the impact in the market for public transportation?

A)The demand curve for public transportation shifts to the right.
B)The quantity of public transportation demanded increases.
C)The demand curve for public transportation shifts to the left.
D)The quantity of public transportation demanded decreases.

Question 40

How does the increasing use of digital cameras affect the market for traditional camera film?

A)The demand curve for traditional camera film shifts to the right.
B)The quantity of traditional camera film demanded decreases.
C)The quantity of traditional camera film demanded increases.
D)The demand curve for traditional camera film shifts to the left.

Question 41

If in the market for apples the supply has decreased then

A)the supply curve for apples has shifted to the right.
B)there has been a movement upwards along the supply curve for apples.
C)the supply curve for apples has shifted to the left.
D)there has been a movement downwards along the supply curve for apples.

Question 42

What is the difference between a "change in demand" and a "change in quantity demanded"?

Question 43

Aging baby boomers are expected to have an effect on the housing market because

A)they have retirement money to use to get out of apartments and into large homes.
B)they tend to buy large vacation homes to accompany their primary residences.
C)older people often downsize their housing by moving from larger homes into smaller homes.
D)they have reached the age where the government will subsidize mortgages valued over $500,000.

Question 44

Figure 3-2
Refer to Figure 3-2.A technological advancement would be represented by a movement from

A)A to B.
B)B to A.
C)S₁ to S₂.
D)S₂ to S₁.

Question 45

The substitution effect explains why there is an inverse relationship between the price of a product and the quantity of the product demanded.

Question 46

An inferior good is a good for which the quantity demanded increases as the price decreases,holding everything else constant.

Question 47

________ means the supply curve has shifted to the right,while ________ refers to a movement along a given supply curve in response to an increase in price.

A)An increase in supply; a decrease in supply
B)A decrease in supply; an increase in supply
C)An increase in supply; an increase in quantity supplied
D)A decrease in supply; a decrease in quantity supplied

Question 48

One would speak of a movement along a supply curve for a good,rather than a change in supply,if

A)the cost of producing the good changes.
B)supplier expectations about future prices change.
C)the price of the good changes.
D)prices of substitutes in production change.

Question 49

A supply curve

A)is a table that shows the relationship between the price of a product and the quantity of the product supplied.
B)is a curve that shows the relationship between the price of a product and the quantity of the product supplied.
C)is the relationship between the supply of a good and the cost of producing the good.
D)is a curve that shows the relationship between the price of a product and the quantity of the product that producers and consumers are willing to exchange.

Question 50

If consumers believe the price of hybrid vehicles will decrease in the future,this will cause the demand for hybrid vehicles to decrease now.

Question 51

The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in the price of a substitute product.

Question 52

If the price of peaches,a substitute for plums,increases the demand for plums will decrease.

Question 53

If in the market for bananas the supply curve has shifted to the right,then

A)the supply of bananas increased.
B)the quantity of bananas supplied has increased.
C)the supply of bananas has decreases.
D)the quantity of bananas supplied has decreased.

Question 54

If consumers view tablet computers as good replacements for ________ demand will most likely be greater than if consumers view tablet computers as good replacements for ________.

A)e-readers; laptop computers
B)e-readers; desktop computers
C)desktop computers; computers in general
D)laptop computers; e-readers

Question 55

Last month,the Tecumseh Corporation supplied 400 units of three-ring binders at $6 per unit.This month,the company supplied the same quantity of binders at $4 per unit.Based on this evidence,Tecumseh has experienced

A)a decrease in supply.
B)an increase in supply.
C)an increase in the quantity supplied.
D)a decrease in the quantity supplied.

Question 56

Cole was discussing the market for cocoa beans with his friend John Schmidt.Cole said,"Ever since Venezuela announced that its cocoa harvest was its lowest ever in fifteen years,the price of cocoa beans has been rising and rising and people are buying more and more.I think the demand for cocoa beans must be upward sloping." Is Cole right? Briefly explain why or why not.

Question 57

For each of the following pairs of products state which are complements,which are substitutes,and which are unrelated.
a.Swim fins and scuba tanks
b.Coca Cola and Volkswagens
c.Printers and ink cartridges
d.Ice and ice chests
e.Heineken and Corona

Question 58

Which of the following would cause an increase in the supply of cheese?

A)a decrease in the price of wine (assuming that cheese and wine are complements)
B)an increase in the price of cheese
C)an increase the price of a product that producers sell instead of cheese
D)an increase in the number of firms that produce cheese

Question 59

In July,market analysts predict that the price of gold will rise in August.What happens in the gold market in July,holding everything else constant?

A)The supply curve shifts to the right.
B)The supply curve shifts to the left.
C)The quantity demanded and the quantity supplied of gold increase.
D)The demand curve shifts to the left.

Question 60

Explain the Law of Demand.

Question 61

Would a change in the price of in-line skates cause a change in the supply of in-line skates? Why or why not?

Question 62

An increase in the price of MP3 players will result in

A)a smaller quantity of MP3 players supplied.
B)a larger quantity of MP3 players supplied.
C)a decrease in the demand for MP3 players.
D)an increase in the supply of MP3 players.

Question 63

A decrease in the price of inputs will cause the supply curve for a product to shift to the right.

Question 64

Figure 3-2
Refer to Figure 3-2.A decrease in the price of inputs would be represented by a movement from

A)A to B.
B)B to A.
C)S₁ to S₂.
D)S₂ to S₁.

Question 65

An increase in quantity supplied is represented by a rightward shift of the supply curve.

Question 66

Farmers can plant either corn or soybeans in their fields.Which of the following would cause the supply of soybeans to increase?

A)an increase in the price of soybeans
B)a decrease in the price of corn
C)an increase in the demand for corn
D)an increase in the price of soybean seeds

Question 67

The supply curve for umbrellas

A)shows the supply of umbrellas consumers are willing and able to buy at any given price.
B)is downward sloping.
C)shows the relationship between the quantity of umbrellas firms are willing and able to supply and the quantity of umbrellas consumers are willing and able to purchase.
D)shows the relationship between the price of umbrellas and the quantity of umbrellas supplied.

Question 68

All else equal,as the price of a product falls,the quantity supplied decreases.

Question 69

Which of the following would shift the supply curve for energy drinks to the left?

A)a decrease in the expected future price of energy drinks
B)an increase in consumer income (assuming that energy drinks are normal goods)
C)a decrease in the number of firms that produce energy drinks
D)a decrease in the price of an input used to produce energy drinks

Question 70

At market equilibrium,

A)demand equals supply.
B)quantity demanded equals quantity supplied.
C)surpluses are greater than shortages.
D)shortages are greater than surpluses.

Question 71

Figure 3-2
Refer to Figure 3-2.An increase in the expected future price of the product would be represented by a movement from

A)A to B.
B)B to A.
C)S₁ to S₂.
D)S₂ to S₁.

Question 72

A positive technological change will cause the quantity supplied of a good to increase.

Question 73

If a firm expects that the price of its product will be lower in the future than it is today

A)the firm has an incentive to increase supply now and decrease supply in the future.
B)the firm has an incentive to decrease supply now and increase supply in the future.
C)the firm has an incentive to increase quantity supplied now and decrease quantity supplied in the future.
D)the firm will not change supply until it knows for certain what will happen to its price.

Question 74

George Gnat subscribes to a monthly pest control service for his home.Last week the owner of the service informed George that he will have to raise his monthly service fee because of increases in the price of gasoline used by his workers on their service trips.How is the market for pest control services affected by this?

A)There is an increase in the supply of pest control services.
B)There is a decrease in the demand for pest control services.
C)There is a decrease in the quantity supplied of pest control services.
D)There is a decrease in the supply of pest control services.

Question 75

A firm has an incentive to decrease supply now and increase supply in the future if it expects that

A)more firms will enter the market in the future.
B)the prices of inputs used to produce the product will rise in the future.
C)the price of its product will be lower in the future than it is today.
D)the price of its product will be higher in the future than it is today.

Question 76

What are the five most important variables that shift the market supply curve?

Question 77

If the United States lifted the embargo on Cuban products,what would happen in the U.S.market for Cuban cigars?

A)The supply curve would shift to the left.
B)The supply curve would shift to the right.
C)The demand curve would shift to the right.
D)The demand curve would shift to the left.

Question 78

Figure 3-2
Refer to Figure 3-2.An increase in the price of the product would be represented by a movement from

A)A to B.
B)B to A.
C)S₁ to S₂.
D)S₂ to S₁.

Question 79

Indicate whether each of the following situations would shift the supply curve to the left,to the right,or not at all.
a.An increase in the price of an input
b.An increase in productivity
c.An increase in the price of a substitute in production
d.A decrease in the expected future price of a product
e.A decrease in the current price of the product

Question 80

The growing popularity of energy conservation has enticed large home improvement stores like Home Depot and Lowes to offer tankless water heaters.How does the fact that home improvement stores now offer these products affect the tankless water heater market?

A)The demand curve for tankless water heaters shifts to the right.
B)The demand curve for tankless water heaters shifts to the left.
C)The supply curve for tankless water heaters shifts to the right.
D)The supply curve for tankless water heaters shifts to the left.