Question 1

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.

Accepted Answer

An inferior good is a good whose demand increases when income decreases. Since a decrease in income leads to an increase in the demand for macaroni, it is an inferior good.

Question 2

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.

Accepted Answer

The income effect of a price change refers to the change in purchasing power (or real income) of consumers due to a change in the price of a good or service. This leads to a movement along the demand curve, as consumers adjust their quantity demanded in response to the change in price. Thus, the correct choice is D, which describes this movement along the demand curve due to a change in purchasing power brought about by the price change.

Question 3

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

Accepted Answer

The income effect of a price change refers to the impact of a change in the price of a good on a consumer's purchasing power, as it affects the disposable income of the consumer. When the price of a good increases, the purchasing power of the consumer decreases, and vice versa. This is different from the substitution effect, which refers to the change in quantity demanded of a good due to a change in its relative price compared to other goods, while holding the consumer's purchasing power constant. Demographics and ceteris paribus are not directly related to the impact of a price change on a consumer's purchasing power.

Question 4

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

Accepted Answer

An increase in the price of the good itself will not shift the demand curve for that good. This is because the demand curve shows the relationship between quantity demanded and price, assuming all other factors remain constant. An increase in the price of the good would simply result in a movement along the demand curve, as consumers would demand less of the good at the higher price. The other options listed would shift the demand curve either to the left (decrease in population, decrease in consumer incomes) or to the right (decrease in the price of a substitute good), indicating a change in the relationship between quantity demanded and price at all possible prices.

Question 5

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.

Accepted Answer

Ice cream is a normal good because as people's income decreases, they are likely to spend less on non-necessary items such as ice cream. This means that the demand for ice cream decreases as income decreases, indicating that it is a normal good.

Question 6

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.

Accepted Answer

The substitution effect only applies to substitutes of the good whose price has changed. Therefore, the decrease in the price of pork rinds would not lead consumers to shift their demand to corn chips. Instead, consumers who previously found pork rinds too expensive may now be willing to buy pork rinds at a lower price, leading to an increase in quantity demanded.

Question 7

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.

Accepted Answer

The increase in competition in the tablet computer industry is a response to changes in consumer tastes. As more consumers have shifted towards using portable devices for tasks that were once relegated to desktop computers, companies have responded by developing and marketing tablet computers. This has led to a highly competitive market as companies vying to capture a larger share of the market.

Question 8

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.

Accepted Answer

The substitution effect of a price change refers to 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. This means that when the price of a good increases, consumers may substitute it with a similar, less expensive good in order to maintain their level of satisfaction. This leads to a decrease in the quantity demanded of the more expensive good and an increase in the quantity demanded of the substitute good.

Question 9

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

Accepted Answer

A movement along the demand curve occurs when there is a change in the quantity demanded of a good due to a change in its price. A shift in the demand curve occurs when there is a change in a non-price determinant of demand, such as consumer income or preferences. Since the question specifically mentions a change in the price of shampoo, this would result in a movement along the existing demand curve for shampoo.

Question 10

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.

Accepted Answer

If the price is the only factor being considered, then the iPad and the Galaxy Tab are substitutes. This means that they serve the same function and can be used interchangeably, and a lower price for the Galaxy Tab would make it a more attractive option than the iPad.

Question 11

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.

Accepted Answer

According to the law of demand, as the price of a good decreases, the quantity demanded of that good will increase. Therefore, holding everything else constant, a decrease in the price of GPS systems will lead to an increase in the quantity of GPS systems demanded.

Question 12

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

Accepted Answer

Expected future prices can change consumers' willingness to buy a product today. For example, if people expect the price of a product to increase in the future, they may be more likely to buy it now, shifting the demand curve to the right. Conversely, if people expect the price of a product to decrease in the future, they may be less likely to buy it now, shifting the demand curve to the left.

Question 13

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.

Accepted Answer

The law of demand states that as the price of a good increases, the quantity demanded of that good will decrease, assuming that all other factors remain constant (such as income, tastes, and prices of related goods). Therefore, as the price of yogurt increases, consumers will want to purchase less yogurt, resulting in a decrease in the quantity of yogurt demanded.

Question 14

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.

Accepted Answer

A demand curve shows the relationship between the price of a product and the quantity of the product demanded. It illustrates the amount of a product that consumers are willing to purchase at each price point, and the demand typically decreases as the price increases.

Question 15

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.

Accepted Answer

The demand curve primarily shows the relationship between the price of a good and the quantity demanded, assuming all other factors remain constant. This implies that price is considered the most important determinant of demand in this context.

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.

Accepted Answer

To find the quantity demanded in the market at a price of $6, we need to add up the individual quantities demanded by Luke, Ravi, and the rest of the market. At a price of $6, Luke would demand 10 pounds, Ravi would demand 15 pounds, and the rest of the market would demand 64 pounds. Adding these up, we get a total quantity demanded of 10 + 15 + 64 = 89 pounds. Therefore, the answer is C.

Question 17

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.

Accepted Answer

The decrease in price leads to a movement along the same demand curve, resulting in an increase in the quantity demanded. This is not a shift in demand, but rather a change in the quantity demanded. Therefore, the correct answer is an increase in quantity demanded.

Question 18

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.

Accepted Answer

When demand has increased, it means that there is a higher quantity of a product or service that consumers are willing and able to purchase at any given price. This results in a rightward shift of the demand curve, indicating that consumers are demanding more of the product at every price level.

Question 19

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.

Accepted Answer

The answer of Table 3-1
 
-Refer to Table 3-1. The...

Question 20

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

Accepted Answer

An increase in demand is represented by a rightward shift of the demand curve, while an increase in quantity demanded is represented by a movement along a given demand curve. The other options are incorrect as they either mix up changes in demand with changes in quantity demanded or incorrectly identify leftward shifts as decreases in demand.

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

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

The income effect of a price change results in a

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.

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

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

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

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

The substitution effect of a price change refers to

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

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

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

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

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

A demand curve shows the relationship between

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

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

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

The phrase "demand has increased" means that

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

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