Question 1

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

If the individual is consuming more dinners at restaurants because of a permanent increase in income, it implies that restaurant meals are a normal good for this individual. A normal good is one whose demand increases with an increase in income, and this seems to be the case here. The fact that the income increase is permanent implies that the individual's purchasing power has increased persistently, and they can afford more of most goods and services, including dinners at restaurants.

Question 2

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

Season tickets for Lakers games are a luxury item, and as people's incomes increase, their demand for luxury items also increases. Therefore, these tickets are a normal good.

Question 3

Which of the following statements is FALSE?

Accepted Answer

An increase in income causes the demand for inferior goods to decrease, not increase, so statement D is false.

Question 4

In economic terminology, an inferior good is a good

Accepted Answer

An inferior good is a good for which demand increases as income decreases. This may be because as consumers have less purchasing power, they may choose to buy cheaper versions of certain goods or substitute away from more expensive options. Examples of inferior goods include generic or store-brand products, lower-quality goods or services, and public transportation.

Question 5

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. As the price of a good increases, the quantity demanded decreases and vice versa. This is because consumers generally have a limited budget and as the price of a good increases, they may switch to a cheaper substitute, reducing the demand for the more expensive good. Normal goods are goods for which the demand increases as income increases, but this is not necessarily reflected in the shape of the demand curve.

Question 6

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 supply curve, not the demand curve. Income, taste and preference, and changes in expectations of future relative prices all affect the demand curve.

Question 7

In economic terminology, a normal good is a good

Accepted Answer

A normal good is one for which demand increases as income increases. This means that as people's incomes grow, they are more likely to buy more of this good. It is opposite of inferior goods, for which demand decreases as income increases.

Question 8

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 demand more of the good now, shifting the demand curve to the right. A decrease in the cost of production (option A) will shift the supply curve to the right, not the demand curve. A decrease in the price of the good (option B) will cause movement along the demand curve, not a shift of the curve.

Question 9

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

An increase in wages for student employees increases their disposable income, leading to a higher demand for goods such as school sweatshirts, thus shifting the demand curve to the right.

Question 10

An inferior good is one for which

Accepted Answer

An inferior good is one for which demand decreases as income increases. This means that as people's income rises, they are more likely to switch to higher quality substitutes for the inferior good, leading to a decrease in demand. Examples of inferior goods include generic/store brand products, public transportation, and fast food.

Question 11

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 12

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 a normal good, resulting in a rightward shift in the demand curve. There is no reason for a change in supply, so option III is incorrect. Option I is incorrect because an increase in income will not lead to a movement down the demand curve, but rather a shift to the right. Therefore, the correct answer is B.

Question 13

Which of the following statements is FALSE?

Accepted Answer

C is false because if the price of a good rises, the quantity demanded of the good decreases, which is represented by a movement upward along the demand curve, not a shift of the demand curve itself. The demand curve shifts only when there are changes in non-price determinants of demand, such as consumer preferences, income, prices of related goods, etc.

Question 14

Fashion trends are a nonprice determinant for demand because

Accepted Answer

Fashion trends can lead to changes in people's tastes and preferences for clothing styles and designs, which in turn can affect the demand for certain types of clothing items. As a result, fashion trends are considered a non-price determinant for demand.

Question 15

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

Since coffee and tea are substitutes, an increase in the price of tea will lead consumers to switch from tea to coffee, causing an increase in the demand for coffee. Thus, the correct answer is A.

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 graphically by a shift of the demand curve to the right, as there is an increase in the quantity demanded at each price point. A movement up along the existing curve shows an increase in price, not demand. A shift of the demand curve to the left shows a decrease in demand. A movement down the existing curve shows a decrease in price, not demand.

Question 18

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

Accepted Answer

The cost of inputs in production is a determinant of supply, not demand. The other options listed are determinants of demand.

Question 19

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

Accepted Answer

An inferior good is a type of normal good where the demand decreases as income increases. Therefore, an inverse relationship between demand and income is characteristic of inferior goods.

Question 20

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

Accepted Answer

If goods X and Y are substitute goods, then an increase in the price of Y will cause consumers to shift their demand towards good X, resulting in an increase in the demand for X and a decrease in the quantity demanded of Y, leading to a decrease in the quantity of Y consumed. Therefore, option C is the best choice.

Quiz 3: Demand and Supply

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

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?

In economic terminology, an inferior good is a good

A demand curve for a normal good

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

In economic terminology, a normal good is a good

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

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?

An inferior good is one for which

If a demand curve shifts, we know that

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 statements is FALSE?

Fashion trends are a nonprice determinant for demand because

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

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 one of the following is NOT a determinant of demand?

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

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