Term
True or False?
Because of the unrealistic assumption that the market being analyzed is a perfectly competitive market, the model of demand and supply have proven to be useful in predicting changes in quantities and prices in only a very few markets. |
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Definition
FALSE.
Despite the unrealistic assumption that the market being analyzed is a perfectly
competitive market, the model of demand and supply has proven to be useful in predicting changes
in quantities and prices in many markets. |
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Term
True or False?
The most important factor affecting the demand for a product is its price. |
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Definition
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Term
True or False?
Quantity demanded is the amount of a good or service that a consumer is willing to purchase at a given
price. |
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Definition
FALSE.
Quantity demanded is the amount of a good or service that a consumer is willing AND
ABLE to purchase at a given price. |
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Term
A decrease in demand is represented by:
1. a movement downward and to the right along a demand curve
2. a movement upward and to the left along the deman curve
3. a rightward shift of the demand curve
4. a leftward shift of the demand curve |
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Definition
| 4. a leftward shift of the deman curve |
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Term
Which of the following would cause a movement upward and to the left along the demand curve for
coffee?
1. consumer income decreases and coffee is a normal good
2. consumer income increases and coffee is an inferior good
3. the price of coffee increases
4. the price of tea, which many consumers consider to be a substitute for coffee, decreases
5. the price of cream, which many consumers consider to be a complement to coffee, increases
6. coffee becomes less popular
7. many coffee consumers die peacefully in their sleep
8. buyers expect the price of coffee to decrease in the future
9. more than one of the above is correct |
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Definition
3. the price of coffee increases
When price increases, quantity demanded decreases, which is shown as a movement
upward and to the left along a demand curve. All of the other changes listed would shift the demand
curve for coffee to the left. |
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Term
True or False?
Consider the following statement: "Dee buys more clothes now that she has graduated and started a fulltime
job." This statement demonstrates the Law of Demand. |
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Definition
FALSE.
This statement demonstrates that, for Dee, clothes are a normal good. The Law of
Demand is demonstrated when someone buys more of a good when its price decreases and less of a
good when its price increases, holding all else constant. |
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Term
Ribs and BBQ sauce are complements. When the price of BBQ sauce increases,
1. the demand for BBQ sauce increases
2. the demand for BBQ sauce decreases
3. the quantity demanded of BBQ sauce increases
4. the quantity demanded of BBQ sauce decreases |
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Definition
| 4. the quantity demanded of BBQ sauce decreases |
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Term
Ribs and BBQ sauce are complements. When the price of BBQ sauce increases,
1. the demand for ribs increases.
2. the demand for ribs decreases.
3. the quantity demanded of ribs increases.
4. the quantity demanded of ribs decreases. |
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Definition
| 2. the demand for ribs decreases |
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Term
Ribs and BBQ sauce are complements. When the price of BBQ sauce increases,
1. the supply of ribs increases.
2. the supply of ribs decreases.
3. the quantity supplied of ribs increases.
4. the quantity supplied of ribs decreases. |
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Definition
4. the quantity supplied of ribs decreases
When the price of BBQ sauce increases, the demand for ribs decreases (shifts left), which
decreases the price of ribs, which decreases the quantity supplied of ribs. |
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Term
True or False?
When buyers expect the future price of a good to decrease, the demand for the good increases now. |
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Definition
FALSE.
When buyers expect the future price of a good to decrease, the demand for the good decreases now. |
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Term
True or False?
The most important factor affecting the supply of a product is input prices. |
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Definition
FALSE.
The most important factor affecting the supply of a product is its price. |
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Term
Which of the following demonstrates the Law of Supply?
1. When sweater producers expected sweater prices to rise in the near future, they began to produce
fewer sweaters.
2. When several new diaper producers entered the market, more diapers were produced.
3. When ketchup prices rose, ketchup producers produced more ketchup.
4. When car production technology improved, car producers produced more cars.
5. When leather, an input in the production of belts, became more expensive, belt producers produced
fewer belts. |
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Definition
3. when ketchip prices rose, ketchup producers produced more ketchup
The Law of Supply is demonstrated when a firm produces less of a good when its price
decreases and more of a good when its price increases, holding all else constant. |
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Term
An increase in quantity supplied is represented by
1. a movement downward and to the left along a supply curve.
2. a movement upward and to the right along a supply curve.
3. a rightward shift of a supply curve.
4. a leftward shift of a supply curve. |
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Definition
| 2. a movement upward and to the right along a supply curve |
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Term
Which of the following would not shift the supply curve for coffee right?
1. the price of coffee increases
2. the price of coffee beans, an input in the production of coffee, decreases
3. coffee production technology improves
4. the price of espresso, which is a substitute in production for coffee, decreases
5. new coffee-producing firms enter the market
6. sellers expect the future price of coffee to decrease
7. All of the above would shift the supply curve for coffee right. |
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Definition
1. the price of coffee increases
When the price of coffee increases, the supply curve for coffee will not shift; instead, there
will be a movement upward and to the right along the supply curve to a higher quantity supplied. |
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Term
Corn and soybeans are substitutes in production. When the price of corn decreases,
1. the supply of corn increases.
2. the supply of corn decreases.
3. the quantity supplied of corn increases.
4. the quantity supplied of corn decreases. |
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Definition
| 4. the quantity supplied of corn decreases |
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Term
Corn and soybeans are substitutes in production. When the price of corn decreases,
1. the supply of soybeans increases.
2. the supply of soybeans decreases.
3. the quantity supplied of soybeans increases.
4. the quantity supplied of soybeans decreases. |
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Definition
1. the supply of soybeans increases
When the price of corn decreases, corn production becomes relatively less profitable and
soybean production becomes relatively more profitable, so producers decrease corn production
(decrease quantity supplied) and increase soybean production (increase supply) by shifting resources
from the production of corn to the production of soybeans. |
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Term
True or False?
Price is the variable that adjusts to bring a market into equilibrium. |
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Definition
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Term
True or False?
In a market economy, there are shortages of scarce resources. |
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Definition
FALSE.
In a market economy, price adjusts until quantity supplied equals quantity demanded, so
there are no shortages of scarce resources in a market economy. |
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Term
True or False?
At a competitive market equilibrium, there is no incentive for sellers to charge less than the market
price for the product. |
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Definition
TRUE.
At a competitive market equilibrium, all firms willing and able to accept the market price
will be able to sell as much of the product as they want, so there is no incentive for sellers to charge
less than the market price for the product. |
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Term
True or False?
An increase in demand causes an increase in supply. |
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Definition
FALSE.
An increase in demand causes price to increase, which increases quantity supplied. |
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Term
In the market for hot dogs, which many consumers consider to be inferior goods, consumer income
increases. This will cause
1. the equilibrium price of hot dogs and the equilibrium quantity of hot dogs to increase.
2. the equilibrium price of hot dogs and the equilibrium quantity of hot dogs to decrease.
3. the equilibrium price of hot dogs to increase and the equilibrium quantity of hot dogs to decrease.
4. the equilibrium price of hot dogs to decrease and the equilibrium quantity of hot dogs to increase. |
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Definition
2. the equilibrium price of hot dogs and the equilibrium quantity of hot dogs to decrease.
The increase in consumer income will cause the demand for hot dogs to shift left, which
will decrease the equilibrium price of hot dogs and the equilibrium quantity of hot dogs. |
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Term
In the market for baskets, buyers expect the future price of baskets to increase. This will cause
1. a surplus at the original equilibrium price, which will be eliminated by an increase in the price of baskets.
2. a surplus at the original equilibrium price, which will be eliminated by a decrease in the price of baskets.
3. a shortage at the original equilibrium price, which will be eliminated by an increase in the price of baskets.
4. a shortage at the original equilibrium price, which will be eliminated by a decrease in the price of baskets. |
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Definition
3. a shortage at the original equilibrium price, which will be eliminated by an increase in the price of baskets.
When buyers expect the future price of baskets to increase, they increase their current
demand for baskets to "stock up" while baskets are cheap. The rightward shift of the demand curve
creates a shortage at the original equilibrium price; sellers eliminate the shortage by increasing price,
which decreases quantity demanded and increases quantity supplied. |
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Term
Peanuts are an input in the production of peanut sauce. In the market for peanut sauce, what will
happen if the price of peanuts decreases?
1. the supply of peanut sauce will shift right, which will create a surplus of peanut sauce at the original
equilibrium price, which will cause sellers to decrease the price of peanut sauce until the quantity
supplied has fallen and the quantity demanded has risen to the new equilibrium quantity.
2. the supply of peanut sauce will shift right, which will create a surplus of peanut sauce at the original
equilibrium price, which will cause sellers to increase the price of peanut sauce until the quantity
supplied has risen and the quantity demanded has fallen to the new equilibrium quantity.
3. the supply of peanut sauce will shift right, which will create a shortage of peanut sauce at the original
equilibrium price, which will cause sellers to decrease the price of peanut sauce until the quantity
supplied has fallen and the quantity demanded has risen to the new equilibrium quantity.
4.the supply of peanut sauce will shift right, which will create a shortage of peanut sauce at the original
equilibrium price, which will cause sellers to increase the price of peanut sauce until the quantity
supplied has risen and the quantity demanded has fallen to the new equilibrium quantity.
5. the supply of peanut sauce will shift left, which will create a surplus of peanut sauce at the original
equilibrium price, which will cause sellers to decrease the price of peanut sauce until the quantity
supplied has fallen and the quantity demanded has risen to the new equilibrium quantity.
6. the supply of peanut sauce will shift left, which will create a surplus of peanut sauce at the original
equilibrium price, which will cause sellers to increase the price of peanut sauce until the quantity
supplied has risen and the quantity demanded has fallen to the new equilibrium quantity.
7. the supply of peanut sauce will shift left, which will create a shortage of peanut sauce at the original
equilibrium price, which will cause sellers to decrease the price of peanut sauce until the quantity
supplied has fallen and the quantity demanded has risen to the new equilibrium quantity.
8. the supply of peanut sauce will shift left, which will create a shortage of peanut sauce at the original
equilibrium price, which will cause sellers to increase the price of peanut sauce until the quantity
supplied has risen and the quantity demanded has fallen to the new equilibrium quantity |
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Definition
1. the supply of peanut sauce will shift right, which will create a surplus of peanut sauce at the original
equilibrium price, which will cause sellers to decrease the price of peanut sauce until the quantity
supplied has fallen and the quantity demanded has risen to the new equilibrium quantity. |
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