Question 1

In economic terminology, a normal good is a good

Accepted Answer

A normal good is a good for which demand increases when income increases. This means that as consumers have more money to spend, they are willing to buy more of the good at various price points. Examples of normal goods include clothing, dining out, and electronics.

Question 2

Assume that coffee and tea are substitutes. Given a downward sloping demand curve for tea, an increase in the price of tea will cause

Accepted Answer

When the price of tea increases, consumers will likely switch to coffee as a substitute, leading to an increase in the demand for coffee.

Question 3

A demand curve for a normal good

Accepted Answer

A demand curve for a normal good shows the inverse relationship between price and quantity demanded. This means that as the price of a normal good increases, the quantity demanded decreases, and vice versa. This is because consumers are usually willing and able to buy more of a good at a lower price, and less of a good at a higher price.

Question 4

For a normal good, an increase in consumer income will lead to I. a movement down the demand curve
II. a rightward shift in the demand curve
III. a reduction in supply

Accepted Answer

An increase in consumer income will lead to an increase in demand for normal goods. This means that there will be a rightward shift in the demand curve, as more consumers want to purchase the good at every price. There is no reason for there to be a reduction in supply in response to an increase in consumer income.

Question 5

Which of the following will cause a rightward shift of the demand curve?

Accepted Answer

An increase in the expected future price of the good will cause consumers to buy more of the good now in order to stock up before the price increases, leading to a rightward shift in the demand curve. A decrease in the cost of production or a decrease in the price of the good would cause a movement along the demand curve, but not a shift.

Question 6

Which one of the following is NOT a determinant of demand?

Accepted Answer

Cost of inputs in production is a determinant of supply, not demand. The other options - prices of related goods, income, and future price expectations - are all factors that influence the demand for a particular good or service.

Question 7

If a demand curve shifts, we know that

Accepted Answer

The demand curve shifts due to factors other than the price of the good itself, such as changes in consumer preferences, income, prices of related goods, and expectations.

Question 8

Suppose a college increases the wages paid to student employees. Which of the following options is the best description of the most likely effect of the increase in wage earnings on the demand curve for school sweatshirts in the bookstore?

Accepted Answer

The answer of Suppose a college increases the wages paid...

Question 9

All of the following will affect the position of the demand curve EXCEPT

Accepted Answer

The prices of resources used to produce the product will affect the position of the supply curve, not the demand curve. The other options listed (income, taste and preference, changes in expectations of future relative prices) are all factors that will affect the position of the demand curve.

Question 10

If the demand of a good is inversely related to income, it must be

Accepted Answer

When the demand for a good is inversely related to income, it means that as income increases, the demand for that good decreases. This is characteristic of an inferior good, which is a good that consumers tend to purchase less of as their income increases and substitute with higher quality alternatives.

Question 11

Suppose an individual experiences a permanent increase in income. As a result of this increased income, further assume that the individual eats dinner at restaurants more frequently each month. This information suggests that dinners at restaurants for this individual are

Accepted Answer

This is an example of a normal good. As the individual's income increases, they are able to afford more dinners at restaurants which are considered a luxury or indulgence. This suggests that dinners at restaurants are a normal good for this individual as the demand increases with an increase in income.

Question 12

An inferior good is one for which

Accepted Answer

An inferior good is one whose demand decreases as income increases. This is because as consumers' income rises, they tend to switch to superior goods or alternatives with better quality or higher price. Examples of inferior goods include cheap fast food, public transportation, and low-quality clothing. As income rises, people tend to prefer healthier and higher-quality food, private cars, and designer clothing, leading to a decrease in demand for inferior goods.

Question 13

If goods X and Y are substitute goods, then an increase in the price of Y, other things being equal,

Accepted Answer

Since goods X and Y are substitute goods, an increase in the price of Y will lead consumers to switch to consuming more of good X. Thus, the quantity of Y consumed will decrease, but the demand for X will increase.

Question 14

If an increase in the incomes of people who live in the Los Angeles area leads to an increase in the demand for season tickets for games played by the Los Angeles Lakers professional basketball team, then these season tickets are

Accepted Answer

A normal good is one where an increase in income leads to an increase in demand. In this case, an increase in the incomes of people in the Los Angeles area leads to an increase in demand for season tickets for Lakers games, suggesting that these tickets are a normal good.

Question 15

Which of the following statements is FALSE?

Accepted Answer

An increase in income causes a decrease in the demand for an inferior good, not a shift to the right in the demand curve. This is because as people's incomes increase, they tend to consume less of inferior goods and more of normal goods.

Question 16

Sarah gets a salary increase of 20 percent. Before her raise, she purchased 5 pounds of hamburger and 1 pound of beef stew a month. After her raise, she consumes 2 pounds of hamburger and 3 pounds of beef stew a month. If everything else is held constant, we know that

Accepted Answer

The answer of Sarah gets a salary increase of 20...

Question 17

An increase in demand is shown graphically by

Accepted Answer

An increase in demand is shown by a shift of the demand curve to the right, indicating that at every price level, consumers are willing and able to buy more of the good or service.

Question 18

Which of the following statements is FALSE?

Accepted Answer

This statement is not always true. If the price of a good rises, the quantity demanded of the good decreases, but the demand curve does not necessarily shift toward the origin if other factors such as changes in income or consumer preferences also occur.

Question 19

In economic terminology, an inferior good is a good

Accepted Answer

An inferior good is a good for which demand decreases as income increases and increases as income decreases. This is because as consumers' income increases, they tend to switch to higher quality goods or substitutes. Common examples of inferior goods include generic brands, fast food, and public transportation.

Question 20

Fashion trends are a nonprice determinant for demand because

Accepted Answer

Fashion trends influence people's tastes and preferences in clothing, which can lead to changes in demand for certain styles or items of clothing. This is not a movement along the demand curve but a shift in the entire curve.

Quiz 3: Demand and Supply

In economic terminology, a normal good is a good

Assume that coffee and tea are substitutes. Given a downward sloping demand curve for tea, an increase in the price of tea will cause

A demand curve for a normal good

For a normal good, an increase in consumer income will lead to I. a movement down the demand curve II. a rightward shift in the demand curve III. a reduction in supply

Which of the following will cause a rightward shift of the demand curve?

Which one of the following is NOT a determinant of demand?

If a demand curve shifts, we know that

Suppose a college increases the wages paid to student employees. Which of the following options is the best description of the most likely effect of the increase in wage earnings on the demand curve for school sweatshirts in the bookstore?

All of the following will affect the position of the demand curve EXCEPT

If the demand of a good is inversely related to income, it must be

Suppose an individual experiences a permanent increase in income. As a result of this increased income, further assume that the individual eats dinner at restaurants more frequently each month. This information suggests that dinners at restaurants for this individual are

An inferior good is one for which

If goods X and Y are substitute goods, then an increase in the price of Y, other things being equal,

If an increase in the incomes of people who live in the Los Angeles area leads to an increase in the demand for season tickets for games played by the Los Angeles Lakers professional basketball team, then these season tickets are

Which of the following statements is FALSE?

Sarah gets a salary increase of 20 percent. Before her raise, she purchased 5 pounds of hamburger and 1 pound of beef stew a month. After her raise, she consumes 2 pounds of hamburger and 3 pounds of beef stew a month. If everything else is held constant, we know that

An increase in demand is shown graphically by

Which of the following statements is FALSE?

In economic terminology, an inferior good is a good

Fashion trends are a nonprice determinant for demand because