Question 1

What is the law of demand?

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Question 2

An economist says: "The demand curve has two interpretations." What does the economist mean?

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Question 3

List the factors change demand and shift the demand curve. Tell what happens to demand and the demand curve when there is an increase in the factor.

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Question 4

General Electric (GE) produces wind turbines that generate wind power. Over the past 10 years, the advances in technology used to produce wind turbines has resulted in

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The advances in technology used to produce wind turbines result in a rightward shift in the supply curve for wind-generated power, indicating an increase in the quantity supplied of wind turbines. This enables GE to produce more wind turbines using fewer resources, contributing to the decrease in the cost of producing wind-generated power.

Question 5

What is the difference between a money price and a relative price? When the demand and supply model predicts that the price of coffee will rise, is the model predicting that the money price rises or the relative price rises?

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Question 6

What is the difference between a normal good and an inferior good? Give an example of each.

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Question 7

What leads to a decrease in the quantity demanded of a good or service?

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Question 8

An economist says: "The supply curve has two interpretations." What does the economist mean?

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Question 9

The Miami Dolphins play football in Joe Robbie Stadium which holds 76,500 seats. In 2009, attendance averaged about 70,000 fans per game. This means that the quantity supplied of seats is

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The quantity supplied of seats refers to the total number of seats available in the stadium, which is 76,500.

Question 10

In 2006, the base price of a Hummer SUV was about $30,000. By 2008 as gasoline prices increased,

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As gasoline prices increased, consumers became less willing to pay the high fuel costs associated with driving a Hummer. This caused a decrease in demand, which shifted the demand curve leftward. In response, Hummer prices decreased in order to entice consumers to purchase the vehicles.

Question 11

Consumers' income declines and, as a result, the demand for margarine increases. Is margarine a normal or an inferior good? Explain.

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Question 12

In mid-2012 Delta increased the price of a New York to LA ticket by 10 percent. As a result of this price hike, there was a ________ shift in the demand curve for a ticket on Continental because the price of a ________ had risen.

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The correct answer is D) rightward; substitute. When the price of a good (in this case, a Delta ticket) increases, consumers will look for alternatives, increasing the demand for substitutes (in this case, Continental tickets). This is represented by a rightward shift in the demand curve for the substitute product.

Question 13

Explain why a relative price is an opportunity cost.

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Question 14

-The figure above shows the market for airline tickets. In early 2008 the price of jet fuel rose. This change is shown in the figure as a shift from

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The increase in the price of jet fuel would increase the costs for airlines, leading to a decrease in supply. This is represented by a shift of the supply curve from its original position (S₀) to a new position (S₁), indicating a leftward shift or decrease in supply.

Question 15

Explain the difference between a change in demand and a change in quantity demanded. What leads to each of these changes?

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Question 16

Computers are a complement to computer software. Suppose the price of a computer falls. How does this fall in price affect the demand for computer software and the demand curve for computer software?

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Question 17

-The figure above shows the market for airline tickets. If airline tickets are a normal good, then the recession in 2008 that caused people's incomes to decrease lead to a shift from

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-The figure above shows the market for...

Question 18

Farmers can use their land to grow soy beans or corn. If the price of corn rises,

Accepted Answer

When the price of corn rises, farmers may switch from growing soybeans to corn to take advantage of the higher prices, effectively decreasing the supply of soybeans. This would cause the soybean supply curve to shift leftward, indicating a decrease in supply.

Question 19

Your friend Tony opened a pizzeria. You helped him to advertise his pizza, which is in fact the best pizza in town. As a result, the demand for Tony's pizza increases and your friend, noticing lines of customers, raises the price of his pizza. But then he fears that the higher price will cause demand to decline, which will cause the price to drop. Is Tony right in his analysis of the situation? Explain.

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Question 20

-The figure above shows the market for airline tickets. In early 2008 firms negotiated lower wages with their workers. This change is shown in the figure as a shift from

Accepted Answer

Negotiating lower wages with workers would reduce the cost of providing airline services, leading to an increase in supply. This is represented by a shift of the supply curve to the right, from S₀ to S₁.

Quiz 3: Demand and Supply