question
The law of demand assumes that as the price of a good increases, _________.
answer
Consumers tend to shift their purchases to relatively cheaper substitutes.
question
A demand curve shows how quantity demanded changes as the price changes. It implies that _________.
answer
Everything else that affects demand is assumed to be constant.
question
The income effect of a decrease in the price of legal services (a normal good) is a(n) _________.
answer
Increase in the quantity demanded of legal services.
question
The effect of a decrease in the price of personal computers, other things constant, is likely to be best represented by which of the following?
answer
A movement rightward along the demand curve.
question
A change in income will _________.
answer
Shift the demand curve for candy.
question
If the price of vanilla ice cream decreases, it is likely that _________.
answer
Demand for chocolate ice cream will decrease.
question
If good B is a complement to good A, then a rise in the price of B _________.
answer
Decreases the demand for A.
question
Which will cause the demand curve for a good to shift to the left?
answer
An expectation of a future price decline.
question
Which is true of an increase in quantity supplied of a given good?
answer
It is caused by an increase in the price of the good.
question
Which would shift the supply curve for a product to the right?
answer
An improvement in the technology for producing the good.
question
Assume that corn and soybeans are alternatives that could be grown by most farmers. An increase in the price of corn will _______.
answer
Decrease the supply of soybeans.
question
Which statement about markets is not true?
answer
All markets provide the same amounts of information.
question
When quantity demanded of a good is less than the quantity supplied at the prevailing market price, ________.
answer
The price of the good tends to fall.
question
If the price of the good described in Exhibit 4-1 is $1.40, then there is a ________.
Price Quantity Demanded Quantity Supplied
$1.00 100 10
$1.20 90 30
$1.40 80 50
$1.50 70 70
$1.60 60 90
Price Quantity Demanded Quantity Supplied
$1.00 100 10
$1.20 90 30
$1.40 80 50
$1.50 70 70
$1.60 60 90
answer
Shortage of 30 units.
question
A decrease in demand will result in a(n)
answer
Decrease in equilibrium price and quantity.
question
What is the effect of a decrease in the price of potato chips on the market for pretzels when both goods are substitutes each other?
answer
Both equilibrium price and equilibrium quantity fall.
question
A new hormone will increase the amount of milk each cow produces. If this hormone is adopted by many dairies, what will be the effect on the milk market?
answer
An increase in supply, lower equilibrium price, and higher equilibrium quantity.
question
If demand increases and supply decreases, ________.
answer
Equilibrium price will rise; equilibrium quantity will either rise, fall, or remain unchanged.
question
Over the last few years, demand for DVDs has increased, and yet their equilibrium price has fallen. Which best explains this situation?
answer
The supply of DVDs must have increased more than the demand for DVDs increased.
question
Suppose a market is in equilibrium and then a price floor is established below the equilibrium price. Which will happen?
answer
The market will remain in equilibrium.
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