Question 1

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 states that as the price of a good falls, consumers will substitute it for other goods, leading to an increase in the quantity demanded of the cheaper good, in this case, pork rinds.

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 reflects the change in purchasing power brought about by the price change. This results in a movement along the demand curve, as consumers respond to the change in relative prices. Therefore, the correct choice is D, which indicates a movement along the demand curve due to a change in purchasing power brought about by the price change. Choices A and C both refer to a shift of the demand curve, which is not caused by the income effect of a price change. Choice B is partially correct, but it does not specifically refer to the income effect of a price change.

Question 3

If an increase in income leads to an increase in the demand for sushi,then sushi is
A)a normal good.
B)a neutral good.
C)a complement.
D)a necessity.

Accepted Answer

If an increase in income leads to an increase in the demand for sushi, then sushi is a normal good. This means that as income rises, people have more money to spend and are more likely to buy more expensive or luxury items like sushi.

Question 4

Table 3-3
 $$\begin{array} { | c | c | c | c | c | } 
\hline  \begin{array} { c } 
\text { Kona Coffee } \
\text { Price per lb. } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Luke's } \
\text { Quantity } \
\text { Demanded } \
\text { (lbs.) }
\end{array} & \begin{array} { c } 
\text { Ravi's } \
\text { Quantity } \
\text { Demanded } \
\text { (lbs.) }
\end{array} & \begin{array} { c } 
\text { Rest af } \
\text { Market } \
\text { Quantity } \
\text { Demanded } \
\text { (lbs.) }
\end{array} & \begin{array} { c } 
\text { Market } \
\text { Quantity } \
\text { Demanded } \
\text { (lbs.) }
\end{array} \
\hline \$ 10 & 3 & 0 & 23 & \
\hline 8 & 9 & 3 & 32 & \
\hline 6 & 14 & 7 & 68 & \
\hline 5 & 18 & 12 & 85 & \
\hline 4 & 22 & 18 & 110 & \
\hline
\end{array}$$
-Refer to Table 3-3.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 lbs.
B)increase by 115 lbs.
C)increase by 35 lbs.
D)decrease by 115 lbs.

Accepted Answer

The answer of Table 3-3
 \[\begin{array} { | c |...

Question 5

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 6

If the price of beef jerky rises,the substitution effect due to the price change will cause
A)an increase in the demand for beef jerky.
B)an increase in the demand for hot sauce,a complement for beef jerky.
C)an increase in the quantity of beef jerky demanded.
D)a decrease in the quantity of beef jerky demanded.

Accepted Answer

The substitution effect of a price increase for beef jerky would cause consumers to look for substitutes, thus reducing the demand for beef jerky and causing a decrease in quantity demanded.

Question 7

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 for which demand decreases as income increases. The inverse is also true, that demand for inferior goods increases as income decreases. Therefore, if a decrease in income leads to an increase in demand for macaroni, it must be an inferior good.

Question 8

Holding everything else constant,a decrease in the price of GPS systems will result in
A)an 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 increases, and vice versa. Therefore, a decrease in the price of GPS systems will result in an increase in the quantity of GPS systems demanded, while holding everything else constant.

Question 9

Holding everything else constant,an increase in the price of raisins will result in
A)a decrease in the quantity of raisins demanded.
B)an increase in the demand for raisins.
C)a decrease in the supply of raisins.
D)an increase in the quantity of raisins demanded.

Accepted Answer

An increase in the price of raisins will result in a decrease in the quantity of raisins demanded, as consumers will likely switch to cheaper alternatives or reduce their overall consumption of raisins. This is a movement along the demand curve, not a shift in the demand curve itself.

Question 10

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

A change in the price of the good itself (as in choice B) will not shift the demand curve, but instead lead to a movement along the existing demand curve. The other choices, such as changes in population, price of substitute goods, and consumer incomes, can all shift the demand curve.

Question 11

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 of that good demanded will decrease, ceteris paribus (i.e. holding everything else constant). Therefore, as the price of yogurt increases, the quantity of yogurt demanded will go down.

Question 12

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 measures the change in a consumer's purchasing power as a result of a change in the price of a good. Specifically, it refers to the change in the quantity of a good that consumers can afford to buy after their income has been adjusted for the price change of the good. As the price of a good decreases, a consumer's purchasing power increases, and they may be able to afford more of the good or substitute it for another good. Conversely, when the price of a good increases, a consumer's purchasing power decreases, and they may be able to afford less of the good or substitute it with a cheaper alternative.

Question 13

If a decrease in income leads to 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

In economics, a normal good is a type of good where demand increases when income increases and demand decreases when income decreases. Ice cream is a typical example of a normal good since people tend to purchase more ice cream when they have more disposable income. Therefore, if a decrease in income leads to a decrease in the demand for ice cream, it implies that ice cream is a normal good.

Question 14

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 goods or services being demanded at a given price level. This can be represented by a shift of the demand curve to the right, indicating that consumers are willing to purchase more at each price point.

Question 15

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 of the product supplied

Accepted Answer

An increase or decrease in expected future prices can change consumer preferences and their willingness to purchase a product, leading to a change in market demand. The other three choices (A, C, and D) may affect the quantity demanded or supplied, but they do not directly impact the entire market demand for the product.

Question 16

Table 3-3
 $$\begin{array} { | c | c | c | c | c | } 
\hline  \begin{array} { c } 
\text { Kona Coffee } \
\text { Price per lb. } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Luke's } \
\text { Quantity } \
\text { Demanded } \
\text { (lbs.) }
\end{array} & \begin{array} { c } 
\text { Ravi's } \
\text { Quantity } \
\text { Demanded } \
\text { (lbs.) }
\end{array} & \begin{array} { c } 
\text { Rest af } \
\text { Market } \
\text { Quantity } \
\text { Demanded } \
\text { (lbs.) }
\end{array} & \begin{array} { c } 
\text { Market } \
\text { Quantity } \
\text { Demanded } \
\text { (lbs.) }
\end{array} \
\hline \$ 10 & 3 & 0 & 23 & \
\hline 8 & 9 & 3 & 32 & \
\hline 6 & 14 & 7 & 68 & \
\hline 5 & 18 & 12 & 85 & \
\hline 4 & 22 & 18 & 110 & \
\hline
\end{array}$$
-Refer to Table 3-3.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 $4,the quantity demanded in the market would be
A)40 lbs.
B)70 lbs.
C)110 lbs.
D)150 lbs.

Accepted Answer

The answer of Table 3-3
 \[\begin{array} { | c |...

Question 17

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 occurs when the price of a good changes and consumers switch to a substitute good that is now relatively cheaper or more affordable. This leads to a change in the quantity demanded of the original good because consumers are substituting it with a substitute good. Option B refers to the cross-price elasticity of demand and not the substitution effect. Option C refers to the income effect of a price change, whereas option D refers to a shift in the entire demand curve due to factors other than price.

Question 18

Table 3-3
 $$\begin{array} { | c | c | c | c | c | } 
\hline  \begin{array} { c } 
\text { Kona Coffee } \
\text { Price per lb. } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Luke's } \
\text { Quantity } \
\text { Demanded } \
\text { (lbs.) }
\end{array} & \begin{array} { c } 
\text { Ravi's } \
\text { Quantity } \
\text { Demanded } \
\text { (lbs.) }
\end{array} & \begin{array} { c } 
\text { Rest af } \
\text { Market } \
\text { Quantity } \
\text { Demanded } \
\text { (lbs.) }
\end{array} & \begin{array} { c } 
\text { Market } \
\text { Quantity } \
\text { Demanded } \
\text { (lbs.) }
\end{array} \
\hline \$ 10 & 3 & 0 & 23 & \
\hline 8 & 9 & 3 & 32 & \
\hline 6 & 14 & 7 & 68 & \
\hline 5 & 18 & 12 & 85 & \
\hline 4 & 22 & 18 & 110 & \
\hline
\end{array}$$
-Refer to Table 3-3.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 lbs.
B)68 lbs.
C)89 lbs.
D)123 lbs.

Accepted Answer

The answer of Table 3-3
 \[\begin{array} { | c |...

Question 19

Table 3-3
 $$\begin{array} { | c | c | c | c | c | } 
\hline  \begin{array} { c } 
\text { Kona Coffee } \
\text { Price per lb. } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Luke's } \
\text { Quantity } \
\text { Demanded } \
\text { (lbs.) }
\end{array} & \begin{array} { c } 
\text { Ravi's } \
\text { Quantity } \
\text { Demanded } \
\text { (lbs.) }
\end{array} & \begin{array} { c } 
\text { Rest af } \
\text { Market } \
\text { Quantity } \
\text { Demanded } \
\text { (lbs.) }
\end{array} & \begin{array} { c } 
\text { Market } \
\text { Quantity } \
\text { Demanded } \
\text { (lbs.) }
\end{array} \
\hline \$ 10 & 3 & 0 & 23 & \
\hline 8 & 9 & 3 & 32 & \
\hline 6 & 14 & 7 & 68 & \
\hline 5 & 18 & 12 & 85 & \
\hline 4 & 22 & 18 & 110 & \
\hline
\end{array}$$
-Refer to Table 3-3.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 falls from $6 to $4,the market quantity demanded would
A)decrease by 89 lbs.
B)increase by 26 lbs.
C)increase by 61 lbs.
D)increase by 110 lbs.

Accepted Answer

The answer of Table 3-3
 \[\begin{array} { | c |...

Question 20

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 change in the price of shampoo would cause a movement along the demand curve, as consumers demand less of it as the price increases and demand more of it as the price decreases. A rightward shift of the demand curve would be caused by an increase in the factors that affect demand, such as consumer income or preferences, while a leftward shift would be caused by a decrease in these factors. A positively sloped demand curve would indicate that as the price of shampoo increases, the quantity demanded also increases, which is not typically the case.

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

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

The income effect of a price change results in a

If an increase in income leads to an increase in the demand for sushi,then sushi is

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

If the price of beef jerky rises,the substitution effect due to the price change will cause

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

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

Holding everything else constant,an increase in the price of raisins will result in

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

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

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.

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

The phrase "demand has increased" means that

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

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.