Question 1

If watermelons are normal goods, the demand for them will rise as the income of consumers rises.

Accepted Answer

When watermelons are considered normal goods, an increase in the income of consumers will lead to an increase in the demand for watermelons. Normal goods are those goods that people tend to buy more of as they get more income. Therefore, the statement is true.

Question 2

Because personal tastes differ, what are substitutes for one person need not be substitutes for another person.

Accepted Answer

Personal tastes and preferences are subjective and can vary greatly from person to person, so what may be a substitute for one individual may not be the same for another.

Question 3

Increasing government taxation or regulation of an industry generally increases the supply of goods.

Accepted Answer

Increasing government taxation or regulation of an industry typically reduces the supply of goods because it increases the cost of production for the producers, which may lead to a decrease in profitability and production levels.

Question 4

If the price of pizza falls, the demand for pizza will rise.

Accepted Answer

The demand curve represents consumers' willingness to purchase at different prices, and a fall in the price of pizza does not shift the demand curve itself but rather results in a movement along the demand curve, leading to an increase in the quantity demanded, not the demand itself.

Question 5

According to the law of demand, other things equal, when the price of a good or service falls, demand increases.

Accepted Answer

According to the law of demand, other things equal, when the price of a good or service falls, the quantity demanded increases, not the demand itself. Demand refers to the entire relationship between prices and the quantity of this good or service that people want at each price, while quantity demanded refers to a specific amount that will be demanded at a specific price.

Question 6

Ceteris paribus, if the price of lumber increases, we would expect an increase in the supply of lumber.

Accepted Answer

The statement is incorrect. An increase in the price of lumber would generally lead to an increase in the quantity supplied of lumber, but not necessarily an increase in the overall supply. The supply of lumber is determined by various factors including the availability of resources, technological advancements, and government regulations, which may not be affected by changes in price alone.

Question 7

A technological advance that reduces the cost of producing computers will shift the supply curve of computers to the right.

Accepted Answer

When the cost of producing computers decreases, suppliers will be able and willing to produce and sell more computers at any given price, which shifts the supply curve to the right.

Question 8

A market is not really a place but rather the process of buyers and sellers exchanging goods and services.

Accepted Answer

A market can refer to the interaction between buyers and sellers, whether it takes place in a physical location or not.

Question 9

According to the law of supply, other things equal, when the price of a good or service rises, the quantity supplied increases, but supply does not.

Accepted Answer

The law of supply states that there is a positive relationship between the price of a good or service and the quantity supplied, assuming other factors are constant. Therefore, an increase in price leads to an increase in quantity supplied, but the supply curve itself does not shift. This is because supply reflects the ability and willingness of sellers to produce and sell a certain quantity at each price level, which does not change in the short run.

Question 10

A competitive market is one in which a number of buyers and sellers are offering similar products, and no single buyer or seller can influence the market price.

Accepted Answer

In a competitive market, no single buyer or seller has the power to affect the price of the product. The market is determined by the forces of supply and demand, with many buyers and sellers offering similar products or services.

Question 11

If an increase in the price of Good A causes an increase in the demand for Good B, Goods A and B are said to be substitutes.

Accepted Answer

When the price of one good increases, consumers may switch to a substitute good that provides a similar benefit for a lower cost. This leads to an increase in the demand for the substitute good, indicating that the two goods are substitutes.

Question 12

Two goods are complements if a decrease in the price of one causes an increase in the demand for the other good.

Accepted Answer

This statement correctly defines the concept of complementary goods. When the price of one good decreases, consumers may be more likely to purchase that good and also the complementary good that goes well with it. For example, if the price of hot dog buns decreases, the demand for hot dogs may increase as people are more willing to purchase both items together.

Question 13

When the price of corn falls relative to the price of wheat, the market supply of wheat (which can be grown on the same land) is likely to increase.

Accepted Answer

When the price of corn falls relative to wheat, farmers may switch to planting more wheat since it now has a higher relative price. This increase in production of wheat would result in a market supply increase.

Question 14

If an increase in the price of Good A causes a decrease in demand for Good B, Goods A and B are said to be complements.

Accepted Answer

Complementary goods are goods that are consumed together. When the price of one good increases, the demand for the other good decreases because people will be less likely to purchase both together.

Question 15

If consumers were originally willing to buy 500 units of a good at a price of $20 are now willing to buy 500 units of the same good at a price of $10, that change would be described as a decrease in demand.

Accepted Answer

A change in consumer willingness to buy a good at different prices is a change in demand. When the quantity demanded at a given price decreases, as in this case where consumers are now willing to buy the same quantity at a lower price, this is considered a decrease in demand.

Question 16

If input prices fall, it will lower the cost of production, causing the supply curve to shift to the right.

Accepted Answer

When input prices fall, the cost of production decreases, so producers can produce more goods at a lower cost. This will lead to an increase in the quantity supplied at every price level, causing the supply curve to shift to the right.

Question 17

When the price of ice cream falls, we would expect the quantity demanded of ice cream to rise, ceteris paribus.

Accepted Answer

This is the law of demand, which states that when the price of a good decreases, the quantity demanded of that good increases, assuming all other factors remain constant (ceteris paribus). As the price of ice cream falls, consumers are more likely to buy it, leading to an increase in demand.

Question 18

If Diet Pepsi and Diet Coke are substitutes than an increase in the price of Diet Pepsi will cause a decrease in demand for Diet Coke.

Accepted Answer

An increase in the price of Diet Pepsi would likely cause an increase in demand for Diet Coke, as consumers switch to the cheaper substitute.

Question 19

If an increase in the price of Good A causes an increase in the demand for Good B, Goods A and B are said to be complements.

Accepted Answer

If an increase in the price of Good A causes an increase in the demand for Good B, then Goods A and B are said to be substitutes, not complements. Complements are goods that are used together, such as peanut butter and jelly or cars and gasoline, and an increase in the price of one would lead to a decrease in demand for the other.

Question 20

If the demand for fast-food rises as a result of lower income, we would say fast-food is an inferior good.

Accepted Answer

An inferior good is a product that consumers demand less of when their income increases. In contrast, a normal good is a product that consumers demand more of when their income increases. Since the demand for fast-food rises as a result of lower income, it is considered an inferior good.

Quiz 4: Demand, Supply, and Market Equilibrium