Deck 3: Market demand and supply

Question 1

The distinction between changes in quantity demanded and changes in demand
Exhibit 3-2 Demand curves

Which of the graphs in Exhibit 3-2 depicts the effect of a reduction in the price of iPhones on the demand for the iPhones?

A) Graph A.
B) Graph B.
C) Graph C.
D) Graph D.

Answer 1

A

Question 2

At a price of $5,Sam buys 10 units of a product.When the price increases to $6,Sam buys 8 units.Martha says Sam's demand has decreased.Is Martha correct?

A)Yes, Martha is correct. Sam's demand has decreased.
B)No, Martha is incorrect. Sam's demand has increased.
C)No, Martha is incorrect. Sam's quantity demanded has decreased, and his demand has not changed.
D)No, Martha is incorrect. Sam's quantity demanded has increased, and his demand has increased.
E)No, Martha is incorrect. Sam's demand has increased, and his quantity demanded has decreased.

Answer 2

C

Question 3

A demand curve:

A)has a positive slope.
B)has a negative slope.
C)is constant regardless of price.
D)is based on the assumption of a stable supply curve.

Answer 3

B

Question 4

The relationship between price and quantity demanded:

A)can only be presented in a tabular form.
B)is always illustrated by a graph.
C)can be represented either numerically or graphically.
D)must be presented using a graph.

Question 5

Exhibit 3-1 Market demand

Suppose there are only three people in the economy: Jane,Harry and Bob.The individual demand for corn for each of these consumers is given in Exhibit 3-1.The total quantity demanded of corn if the market price is $4 is _____.

A)3
B)8
C)17
D)25
E)36

Question 6

Consumer sovereignty means:

A)sellers are able to sell the product of their choice.
B)supply follows the demand.
C)less freedom of consumers to make their own choices.
D)less regulation from the government.

Question 7

According to the law of demand:

A)as the price of a good increases, less units are demanded.
B)as the price of a good increases, the same number of units is demanded.
C)as the price of a good declines, less units are demanded.
D)the price of a good does not correspond to the quantity demanded.

Question 8

Other things being equal,the effect of a decrease in the price of compact discs on the market for compact disc players is a/an:

A)leftward shift in the demand curve for compact disc players.
B)upward movement along the demand curve for compact disc players.
C)rightward shift in the demand curve for compact disc players.
D)downward movement along the demand curve for compact disc players.

Question 9

Demand for goods and services reflects:

A)the principle that there is a positive relationship between the price and the quantity.
B)the government's choices of taxes.
C)the freedom of consumers to make their own choices about which goods and services to buy.
D)the uncertainty of the need for a good as the price of the good increases.

Question 10

Assume that croutons and soup are complementary goods.The effect on the soup market of a decrease in the price of croutons (other things being equal)would best be described as a/an:

A)decrease in the quantity of soup demanded.
B)decrease in the demand for soup.
C)increase in the quantity of soup demanded.
D)increase in the demand for soup.

Question 11

If the price of potato chips increases,other things being equal,demand for potato-chip dip will:

A)not change, only the quantity demanded will change.
B)increase, because the goods are substitutes.
C)decrease, because the goods are substitutes.
D)decrease, because the goods are complements.
E)increase, because the goods are complements.

Question 12

Suppose that X and Y are substitute goods.If the price of good X increases,we can expect:

A)the demand for good X to shift to the left.
B)an upward movement along the demand curve for good Y.
C)the demand curve for good Y to shift to the right.
D)a downward movement along the demand curve for good Y.
E)the demand curve for good Y to shift to the left.

Question 13

The fact that price and quantity demanded are related negatively illustrates the:

A)law of supply.
B)law of quantity supplied.
C)law of demand.
D)law of quantity demanded.
E)point that some facts are unobservable.

Question 14

Exhibit 3-1 Market demand

Suppose there are only three people in the economy: Jane,Harry and Bob.The individual demand for corn for each of these consumers is given in Exhibit 3-1.The total quantity demanded of corn if the market price is $5 is _____.

A)3
B)25
C)17
D)8
E)26

Question 15

Which of the following pairs is the best example of substitutes?

A)Coffee and cream.
B)Videotapes and VCRs.
C)Honey and biscuits.
D)Tortillas and salsa.
E)Hiking boots and athletic shoes.

Question 16

The distinction between changes in quantity demanded and changes in demand
Exhibit 3-2 Demand curves

Which of the graphs in Exhibit 3-2 depicts the effect of an increase in income on the demand for luxury cars?

A) Graph A.
B) Graph B.
C) Graph C.
D) Graph D.

Question 17

Assuming that hamburgers and hot dogs are substitutes,an increase in the price of hamburgers,other things being equal,results in a:

A)rightward shift in the demand curve for hot dogs.
B)leftward shift in the demand curve for hamburgers.
C)rightward shift in the demand curve for hamburgers.
D)leftward shift in the demand curve for hot dogs.

Question 18

Demand is a relationship between two economic variables:

A)the cost of a particular good and the quantity of the good produced.
B)the cost of a particular good and the quantity of the good consumers are willing to buy.
C)the price of a particular good and the price consumers are willing to pay.
D)the price of a particular good and the quantity of the good consumers are willing to buy.

Question 19

The distinction between changes in quantity demanded and changes in demand
Exhibit 3-2 Demand curves

Which of the graphs in Exhibit 3-2 depicts the effect of new information about healing properties of honey on the demand curve for sugar?

A) Graph A.
B) Graph B
C) Graph C.
D) Graph D.

Question 20

A demand curve for The Steel Porcupines' concert tickets would show the:

A)number of tickets the box office is willing to sell at various prices.
B)number of people who need tickets.
C)quality of people who want to buy these concert tickets.
D)number of tickets that will be purchased at various prices.

Question 21

A complementary good is:

A)a good that is not related to any other good.
B)a good that is given to you for free.
C)a good that is jointly consumed with another good.
D)a good that is consumed instead of another good.

Question 22

Assume that a computer is a normal good.An increase in consumer income,other things being equal,would:

A)cause an upward movement along the demand curve for computers.
B)cause a downward movement along the demand curve for computers.
C)shift the demand curve for computers to the left.
D)shift the demand curve for computers to the right.

Question 23

Complementary goods are goods:

A)that are consumed jointly.
B)that are consumed one in place of the other.
C)for which demand increases when the price of its complementary goods increases.
D)for which demand decreases when the price of its complementary goods decreases.
E)that are inversely related.

Question 24

If physical fitness becomes fashionable,what will happen in the market for sport outfits?

A)Demand will increase.
B)Quantity demanded will increase.
C)Demand will decrease.
D)Quantity demanded will decrease.
E)Supply will decrease.

Question 25

If the price of hot dogs increases,what will happen in the market for potato chips,a complementary good?

A)Demand will increase.
B)Quantity demanded will increase.
C)Demand will decrease.
D)Quantity demanded will decrease.
E)Supply will decrease.

Question 26

A decrease in the demand for peanut butter,a normal good,can be caused by a/an:

A)decrease in consumer income.
B)increase in the price of jams and preserves.
C)decrease in the price of bread.
D)drought in Queensland that destroyed 30 per cent of the peanut crop.
E)decrease in the price of sliced ham.

Question 27

If consumers are anticipating a wet summer,then:

A)the demand for hotdogs will increase.
B)the demand for raincoats will shift to the right.
C)the demand for umbrellas will not be affected.
D)the demand for umbrellas will shift to the left.

Question 28

An increase in the demand for a good quality steak,a normal good,can be caused by a/an:

A)decrease in consumer income.
B)increase in the price of steak.
C)increase in the price of tomato sauce.
D)increase in consumer income.
E)decrease in the price of sliced ham.

Question 29

Suppose that X and Y are complementary goods.If the price of good X decreases,we can expect the:

A)demand for good X to increase.
B)quantity demanded of good Y to decrease.
C)quantity demanded of good Y to increase.
D)demand for good Y to decrease.
E)demand for good Y to increase.

Question 30

If consumer incomes go up and laptops are a normal good,the effect on the demand for laptops,ceteris paribus,will be a/an:

A)upward movement along the demand curve for laptops.
B)downward movement along the demand curve for laptops.
C)rightward shift in the demand curve for laptops.
D)leftward shift in the demand curve for laptops.

Question 31

The demand curve shows how the quantity demanded is related to the price.A change in other variables will:

A)shift the demand curve to the left.
B)shift the demand curve to the right.
C)not shift the demand curve.
D)shift the demand curve.

Question 32

There is news that the price of Tucker's Cider Explosion will increase significantly next week.If the demand for Tucker's Cider Explosion reacts only to this factor and shifts to the right,the position of this demand curve has reacted to a change in:

A)tastes.
B)income levels.
C)the price of other goods.
D)the number of buyers.
E)expectations.

Question 33

If people expect the price of bread to increase next month:

A)demand for bread will decrease.
B)quantity of bread demanded will decrease.
C)quantity of bread demanded will increase.
D)demand for bread will increase.
E)quantity of bread demanded will not change.

Question 34

If an individual's income increases,then the demand for a normal good will:

A)decrease.
B)increase.
C)remain constant.
D)rotate.
E)fall to zero.

Question 35

Assume that brand X is an inferior good and name brand Y is a normal good.An increase in consumer income,other things being equal,will cause a/an:

A)upward movement along the demand curve for name brand Y.
B)downward movement along the demand curve for brand X.
C)rightward shift in the demand curve for brand X.
D)leftward shift in the demand curve for brand X.

Question 36

Assuming that bus travel is an inferior good,a decrease in consumer income,other things being equal,will cause:

A)a downward movement along the demand curve for bus travel.
B)no change in the demand curve for bus travel.
C)an upward movement along the demand curve for air travel.
D)a rightward shift in the demand curve for bus travel.

Question 37

Assuming that new cars are a normal good,a decrease in consumer income,other things being equal,will:

A)decrease the quantity demanded of new cars.
B)increase the demand for new cars.
C)decrease the demand for new cars.
D)increase the quantity of new cars demanded.

Question 38

If good X is an inferior good,a decrease in consumer income,other things being equal,will shift the:

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

Question 39

Which of the following must be true if good X is a normal good and income increases?

A)The demand for X will increase, and thus the price and quantity sold and bought will decrease.
B)The demand for X will decrease, and thus the price and quantity sold and bought will decrease.
C)The demand for X will increase, and thus the price and quantity sold and bought will increase.
D)The demand for X will decrease, and thus the price and quantity sold and bought will increase.
E)The demand for X will increase, and thus the price and quantity sold and bought will remain the same.

Question 40

Assuming that day old bread is an inferior good,an increase in consumer income,other things being equal,will cause a/an:

A)rightward shift in the demand curve for day old bread.
B)downward movement along the demand curve for day old bread.
C)leftward shift in the demand curve for day old bread.
D)upward movement along the demand curve for day old bread.

Question 41

What happens when a cyclone destroys the banana plantation?

A)The damaging effect of the cyclone means that farmers are only able to supply fewer bananas at each possible price and supply decreases.
B)There is no effect of cyclone on market prices.
C)The damaging effect of the cyclone means that farmers are able to produce apples instead of bananas with no effect on the supply of bananas.
D)The prices for bananas will increase permanently.

Question 42

Exhibit 3-3 Supply curves

In Exhibit 3-3,a shift in the supply curve from S₁ to S₂ can be because of:

A)subsidies to consumers.
B)higher taxes imposed on producers.
C)changes in consumer preferences.
D)technological innovation.

Question 43

A change in supply cannot be caused by a change in:

A)resource prices.
B)technology.
C)expectations of consumers.
D)prices of other goods.
E)the number of suppliers.

Question 44

Which of the following will cause a downward movement along a supply curve?

A)Decreases in raw-material costs.
B)Decreases in labour costs.
C)Decreases in the cost of machinery.
D)Decreases in the market price of a good, other things being equal.

Question 45

Which of the following states the definition of the law of supply?

A)More of a good is supplied at a lower price.
B)There is a positive relationship between the price of a good and the quantity that buyers purchase.
C)There is a positive relationship between the price of a good and the quantity offered for sale by suppliers.
D)There is a negative relationship between the price of a good and the quantity offered for sale by suppliers.

Question 46

The law of supply states that:

A)there is a negative relationship between the price of a good and the quantity of it purchased by suppliers.
B)there is a positive relationship between the price of a good and the quantity that buyers choose to purchase.
C)there is a positive relationship between the price of a good and the quantity of it offered for sale by suppliers.
D)at a lower price, a greater quantity will be supplied.

Question 47

Supply is a relationship between:

A)price of a particular good and quantity of this good buyers are willing to buy.
B)cost of a particular good and quantity of this good sellers are willing to buy.
C)price of a particular good and quantity of this good sellers are willing to sell.
D)cost of a particular good and price buyers are willing to pay.

Question 48

Which of the following will cause a movement along the supply curve?

A)An increase or decrease in the cost of raw materials.
B)An increase in labour costs.
C)Changes in the cost of the machinery used to make a good.
D)Changes in the market price of a good, other things being constant.

Question 49

Supply is:

A)the number of units available.
B)the cost of resources.
C)the relationship between the number of units available and demand.
D)the relationship between a range of prices and quantities supplied.

Question 50

The introduction of the carbon trading scheme which requires polluters to purchase permits will:

A)shift the supply curve to the left.
B)shift the supply curve to the right.
C)increase the quantity supplied.
D)decrease the quantity supplied.
E)decrease the demand.

Question 51

Exhibit 3-3 Supply curves

In Exhibit 3-3,a shift in the supply curve from S₁ to S₂ represents a/an:

A)decrease in supply.
B)decrease in the quantity supplied.
C)increase in supply.
D)increase in the quantity supplied.
E)increase in demand.

Question 52

The law of supply states that:

A)there is a negative relationship between the quantity supplied and the price.
B)the demand follows the supply.
C)the price of the good is determined by the demand not by supply.
D)the higher the price the more quantity will be supplied to the market.

Question 53

A supply schedule shows the relationship between:

A)demand and supply.
B)supply and income.
C)price and income.
D)quantity supplied and price.
E)income and quantity supplied.

Question 54

The supply curve reflects the:

A)inverse relationship between price and quantity offered.
B)positive relationship between demand and supply.
C)negative relationship between price and quantity bought.
D)positive relationship between price and quantity bought.
E)positive relationship between price and quantity offered.

Question 55

Farmers can choose to produce eggs and/or milk.If there is a successful advertising campaign for people to 'drink milk',then what will be the effect on the egg market?

A)None, since consumers do not see eggs and milk as related goods.
B)Egg demand will increase.
C)Egg demand will decrease.
D)Egg supply will increase.
E)Egg supply will decrease.

Question 56

A decrease in supply means that:

A)demand will increase by the same amount.
B)the quantity demanded will increase.
C)there is a movement down and to the left along the supply curve.
D)the quantity supplied at every price will decrease.
E)the supply curve will shift out and to the right.

Question 57

Which of the following factors do not shift supply curves?

A)Number of sellers.
B)Number of buyers.
C)Technology.
D)Input prices.
E)Taxes and subsidies.

Question 58

A leftward shift of a supply curve is called a/an:

A)decrease in demand.
B)increase in supply.
C)decrease in supply.
D)increase in quantity supplied.
E)decrease in quantity supplied.

Question 59

Exhibit 3-3 Supply curves

In Exhibit 3-3,which of the following could have caused the shift in the supply curve from S₁ to S₂?

A)Increase in demand.
B)Decrease in demand.
C)Decrease in the number of suppliers in the market.
D)Increase in the number of sellers.
E)Increase in the cost of materials.

Question 60

If more people enter medical school,we can expect:

A)the demand for doctors to increase.
B)the supply of doctors to increase.
C)the demand for doctors to decrease.
D)the supply of doctors to decrease.
E)no effect on the supply or demand of doctors - just a movement along the curves.

Question 61

Equilibrium occurs:

A)at any price for which quantity demanded is less than the quantity supplied.
B)at the highest possible price the seller can offer the product.
C)at the lowest price consumers are willing to pay.
D)at any price for which demand is equal to supply.

Question 62

If government introduces a new subsidy to poultry farmers,we can expect:

A)no effect on the supply or demand of poultry - just a movement along the curves.
B)the demand for poultry to decrease.
C)the demand for poultry to increase.
D)the supply of poultry to decrease.
E)the supply of poultry to increase.

Question 63

Which of the following will not cause a movement along the supply curve?

A)Changes in consumers' expectations.
B)Increases in consumers' income.
C)Changes in consumers' preferences.
D)Changes in input prices.

Question 64

Innisfail banana farmers said that they lost up to 15 per cent of crop because of wild weather.This indicates that the:

A)price of bananas will fall.
B)quantity of bananas that will be available at any given price has decreased.
C)demand for bananas will shift to the left.
D)quantity of bananas that will be available at any given price have increased.

Question 65

Which of the following would decrease the supply of airline travel?

A)Reduced numbers of airline travellers.
B)New airline companies beginning operations.
C)Higher fuel costs.
D)Lower prices for airline tickets.

Question 66

The most plausible reason why changes in the price of cotton can cause shifts in the supply curve for tobacco is:

A)cigarette smokers often wear cotton shirts.
B)when incomes rise, people consume more cotton and tobacco.
C)firms can switch from growing tobacco to cotton and vice versa.
D)tobacco is an input in the production of cotton.
E)cotton and tobacco are unrelated markets in all ways.

Question 67

Which of the following could cause the supply of carrots to decrease?

A)Consumers' incomes decrease.
B)There is a technological advance in carrot production.
C)Fertiliser costs increase.
D)The number of farmers growing carrots increases.
E)The price of carrots decreases.

Question 68

In a market,competitive forces guarantee that any price other than the equilibrium price is:

A)market-clearing.
B)stable.
C)temporary.
D)unaffordable.

Question 69

'Coal mining companies anticipate an additional tax.' This statement indicates that the:

A)price of coal will fall.
B)quantity of coal that will be available at any given price has decreased.
C)demand for coal will shift to the left.
D)quantity of coal that will be available at any given price has increased.

Question 70

A shift occurs in the supply curve for salt when:

A)the price of salt increases.
B)improvements are made in the production process.
C)salt is found to be associated with high blood pressure.
D)consumers expect the price of salt to increase in the future.

Question 71

The relationship between changes in the non-price determinants of supply and the supply curve:

A)is positive and significant.
B)depends on the nature of the non-price determinant of supply.
C)always results in an increase in supply.
D)indicates a rightward shift of the supply curve for all goods and services.

Question 72

An improvement in technology will:

A)increase the demand.
B)lower the cost of production.
C)decrease the demand.
D)increase the cost of production.

Question 73

There is a technological advance in the production of digital watches.This will cause:

A)demand to increase.
B)supply to increase.
C)demand to decrease.
D)supply to decrease.
E)the price to increase.

Question 74

Which of the following will increase the supply of a good?

A)An increase in the price of another good producers could produce.
B)A lower price paid for resources used in the production of the good.
C)A decrease in the number of sellers.
D)An increase in taxes paid to the government by producers.

Question 75

The equilibrium price is best defined as the price at which:

A)quality demanded is equal to quantity supplied.
B)suppliers want to supply more goods.
C)demanders want to buy more goods.
D)quantity demanded is equal to quantity supplied.
E)the quantity demanded increases

Question 76

Assuming that oranges and apples can both be grown on the same type of land,a decrease in the price of apples,other things being equal,will cause a/an:

A)upward movement along the supply curve for oranges.
B)downward movement along the supply curve for oranges.
C)rightward shift of the supply curve for oranges.
D)leftward shift of the supply curve for oranges.

Question 77

If the current price of a good is the same as that found at the intersection of the market supply and demand curves,then:

A)excess demand exists.
B)excess supply exists.
C)the price will tend to rise.
D)the price will tend to fall.
E)the market is in equilibrium.

Question 78

When the price of a good is above its equilibrium price,a:

A)surplus puts upward pressure on the price.
B)surplus puts downward pressure on the price.
C)shortage puts upward pressure on the price.
D)shortage puts downward pressure on the price.

Question 79

Consider the following statement: 'Due to the drought the quantity of water available for consumption reduced dramatically'.This will cause a/an:

A)downward movement along the supply curve for water.
B)upward movement along the supply curve for water.
C)rightward shift in the supply curve for water.
D)leftward shift in the supply curve for water.

Question 80

If apple growers expect the price of apples to increase,they would:

A)increase the current supply.
B)supply regardless of future prices.
C)restrict the current supply.
D)start growing tomatoes.