ch 2 market forces: demand and supply

question

law of demand

answer

as the price of a good rises (falls) and all other things remain constant, the quantity demanded of the good falls (rises).

question

market demand curve

answer

A curve indicating the total quantity of a good all consumers are willing and able to purchase at each possible price, holding the prices of related goods, income, advertising, and other variables constant.

question

demand shifters

answer

variables other than the price of a good that influence demand

question

change in quantity demanded

answer

the movement along a demand curve

question

change in demand

answer

the position of the entire demand curve shifts

question

normal good

answer

a good whose demand increases (shifts to the right) when consumer incomes rise

question

What do economists use to describe the amount of good X that will be purchased at different prices of good X, at different prices of related goods, and at alternative income levels?

answer

demand function

question

An increase in demand is best characterized by which of the following?

answer

Demand curve shifts to the right

question

Which of the following describes supply and demand analysis?

answer

A qualitative tool
Use to predict pricing trends
A forecasting tool

question

The demand function indicates that the quantity of a good consumed depends on:

answer

the income of buyers
the price of the good
the effect of the demand shifters

question

An increase in consumer income _________ the demand for normal goods and ________ the demand for inferior goods.

answer

increases, decreases

question

Which area forms consumer surplus?

answer

The area below the demand curve and above the price.

question

Which of the following will cause a decrease in the supply of "farm-to-fork" vegetables?

answer

An increase in the price of fertilizer used on these farms
A reduction in the number of "farm-to-fork" vegetable producers
An increase in government regulations on agriculture

question

The following function, Qxs = f (Px, Pr, W, H), shows that the quantity produced in a market depends on the price of the good, Px, and:

answer

the price of inputs such as labor costs.
the price of technologically related goods.
the value of other variables that affect supply such as taxes.

question

The difference between the market price and the amount at which producers are willing and able to sell a good is called _______ surplus.

answer

producer surplus

question

If the price of a good or service exceeds the equilibrium price, a _____ exists. As a result, price tends to _____.

answer

surplus; fall

question

Graphically, what area represents producer surplus?

answer

The area above the supply curve and below the price.

question

A binding price ceiling tends to create what type of condition in the market?

answer

shortage

question

A function that describes the relationship between output and various prices of that output, prices of inputs, and values of other variables is called

answer

the supply function

question

Demand is given by: Qd = 100 - 2P
Supply is given by: Qs = 60 + 2P

Determine the equilibrium price (P) and quantity (Q).

answer

P = $10; Q = 80

question

True or false: When a price floor applies to a product, rather than labor, the deadweight loss will always be less.

answer

false

question

comparative static analysis

answer

the study of the movement from one equilibrium to another

question

Comparative static analysis assumes which of the following?

answer

Goods are allocated by price
No price ceilings
No price floors

question

In labor markets, an effective price floor creates ____________.

answer

unemployment

question

Suppose there is an increase in the price of pork. If chicken is a substitute for pork, what can producers and consumers of chicken expect to see in the market for chicken?

answer

An increase in the quantity of chicken purchased
An increase in the price of chicken

question

which of the following would not shift the demand for good A?

answer

drop in price of good A

question

changes in price of good A leads to a change in :

answer

the quantity demanded of good A

question

a change in income will NOT lead to:

answer

a movement along the demand curve

question

Suppose the demand for good X is given by Qdx = 10 + axPx + ayPy + aMM. From the law of demand we know that ax will be:

answer

less than zero

question

18. Suppose the demand for good X is given by Qdx = 10 + axPx + ayPy + aMM. If ay is positive, then:

answer

goods y and x are substitutes

question

Suppose the demand for good X is given by Qdx = 10 + axPx + ayPy + aMM. If aM is negative, then good y is:

answer

an inferior good

question

the economic principle that producers are willing to produce more output when price is high is depicted by the:

answer

upward slope of the supply curve

question

for a steel factory, a decrease in the cost of electricity to the plant will cause the supply curve to:

answer

shift to the right

1 of 33

question

law of demand

answer

as the price of a good rises (falls) and all other things remain constant, the quantity demanded of the good falls (rises).

question

market demand curve

answer

question

demand shifters

answer

variables other than the price of a good that influence demand

question

change in quantity demanded

answer

the movement along a demand curve

question

change in demand

answer

the position of the entire demand curve shifts

question

normal good

answer

a good whose demand increases (shifts to the right) when consumer incomes rise

question

What do economists use to describe the amount of good X that will be purchased at different prices of good X, at different prices of related goods, and at alternative income levels?

answer

demand function

question

An increase in demand is best characterized by which of the following?

answer

Demand curve shifts to the right

question

Which of the following describes supply and demand analysis?

answer

A qualitative tool
Use to predict pricing trends
A forecasting tool

question

The demand function indicates that the quantity of a good consumed depends on:

answer

the income of buyers
the price of the good
the effect of the demand shifters

question

An increase in consumer income _________ the demand for normal goods and ________ the demand for inferior goods.

answer

increases, decreases

question

Which area forms consumer surplus?

answer

The area below the demand curve and above the price.

question

Which of the following will cause a decrease in the supply of "farm-to-fork" vegetables?

answer

An increase in the price of fertilizer used on these farms
A reduction in the number of "farm-to-fork" vegetable producers
An increase in government regulations on agriculture

question

The following function, Qxs = f (Px, Pr, W, H), shows that the quantity produced in a market depends on the price of the good, Px, and:

answer

the price of inputs such as labor costs.
the price of technologically related goods.
the value of other variables that affect supply such as taxes.

question

The difference between the market price and the amount at which producers are willing and able to sell a good is called _______ surplus.

answer

producer surplus

question

If the price of a good or service exceeds the equilibrium price, a _____ exists. As a result, price tends to _____.

answer

surplus; fall

question

Graphically, what area represents producer surplus?

answer

The area above the supply curve and below the price.

question

A binding price ceiling tends to create what type of condition in the market?

answer

shortage

question

A function that describes the relationship between output and various prices of that output, prices of inputs, and values of other variables is called

answer

the supply function

question

Demand is given by: Qd = 100 - 2P
Supply is given by: Qs = 60 + 2P

Determine the equilibrium price (P) and quantity (Q).

answer

P = $10; Q = 80

question

True or false: When a price floor applies to a product, rather than labor, the deadweight loss will always be less.

answer

false

question

comparative static analysis

answer

the study of the movement from one equilibrium to another

question

Comparative static analysis assumes which of the following?

answer

Goods are allocated by price
No price ceilings
No price floors

question

In labor markets, an effective price floor creates ____________.

answer

unemployment

question

Suppose there is an increase in the price of pork. If chicken is a substitute for pork, what can producers and consumers of chicken expect to see in the market for chicken?

answer

An increase in the quantity of chicken purchased
An increase in the price of chicken

question

which of the following would not shift the demand for good A?

answer

drop in price of good A

question

changes in price of good A leads to a change in :

answer

the quantity demanded of good A

question

a change in income will NOT lead to:

answer

a movement along the demand curve

question

Suppose the demand for good X is given by Qdx = 10 + axPx + ayPy + aMM. From the law of demand we know that ax will be:

answer

less than zero

question

18. Suppose the demand for good X is given by Qdx = 10 + axPx + ayPy + aMM. If ay is positive, then:

answer

goods y and x are substitutes

question

Suppose the demand for good X is given by Qdx = 10 + axPx + ayPy + aMM. If aM is negative, then good y is:

answer

an inferior good

question

the economic principle that producers are willing to produce more output when price is high is depicted by the:

answer

upward slope of the supply curve

question

for a steel factory, a decrease in the cost of electricity to the plant will cause the supply curve to:

answer

shift to the right

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