Chapter 3

Question 1

Assuming that chicken and beef are substitutes, a decrease in the price of beef, other things being equal will…

Answer 1

decrease the demand for chicken

Question 2

An increase in the supply of the product implies:

Answer 2

producers will now charge a lower price for a given quantity of output

Question 3

a surplus of wheat:

Answer 3

is impossible if the price of wheat is below equilibrium

Question 4

Assume that peanut butter and jelly are complementary goods, a decrease in the number of peanut butter suppliers will cause the :

Answer 4

demand for jelly to increase

Question 5

Other things being equal, the effects of a decrease in the price of orange juice is represented by which of the following :

Answer 5

an increase in the quantity demanded for orange juice

Question 6

the demand schedule for a good shows:

Answer 6

the specific quantity of the good that people are willing and able to buy at different prices

Question 7

the price of a good will fall if:

Answer 7

there is an excess supply of the good

Question 8

Ceteris paribus, a change in the price of a good always results in a change in:

Answer 8

quantity demanded

Question 9

If quantity demanded is greater than quantity supplied, then according to the market process:

Answer 9

the price will rise

Question 10

the law of demand indicates that the price of a good increases:

Answer 10

buyers buy less of it

Question 11

Which of the following pairs is the best example of substitutes? coffee and cream, honey and biscuits, tortillas and salsa, hiking boots and athletic shoes

Answer 11

hiking boots and athletic shoes

Question 12

If butter is a substitute for margarine, then an increase in the price of butter would be most likely to cause:

Answer 12

a rightward shift of demand for margarine

Question 13

define the law of demand

Answer 13

the principle that there is an inverse relationship between the price of a good and the quantity buyers are willing to purchase in a defined time period ceteris paribus

Question 14

define demand

Answer 14

a curve or schedule showing the various quantities of a product consumers are willing to purchase at possible prices during a specified period of time, ceteris paribus

Question 15

define nonprice determinants aka demand shifters

Answer 15

factors that can influence the position of the demand curve and are not the price of the good its self

Question 16

what are the major nonprice determinants

Answer 16

the number of buyers; tastes and preferences; income; expectations of future changes in prices, income, and availability of goods: and prices of related goods

Question 17

what is a change in quantity demanded

Answer 17

a movement between points along a stationary demand curve, ceteris paribus

Question 18

any decrease in price along the vertical axis will cause an increase in quantity demanded, measured along the horizontal axis under which law

Answer 18

the law of demand

Question 19

what is a change in demand

Answer 19

an increase of decrease in the quantity demanded at each possible price. an increase in demand is a rightward shift in the entire demand curve. a decrease in a demand shift is a leftward shift in the entire demand curve

Question 20

nonprice determinants can have what effect on the demand curve and why not the other, (shift or movement) and what causes this

Answer 20

shift which is caused by a change in price

Question 21

decrease in price causes what causes

Answer 21

increase in quantity demanded

Question 22

change in nonprice determinant causes

Answer 22

increase in demand

Question 23

using effect and termninology how is the demand curve affected by price increases

Answer 23

effect: upward movement along the demand curve
terminology: decrease in the quantity demanded

Question 24

using effect and termninology how is the demand curve affected by price decreases

Answer 24

downward movement along the demand curve

terminology: increase in the quantity demanded

Question 25

using effect and termninology how is the demand curve affected by nonprice determinant

Answer 25

effect: leftward or rightward shift in the demand curve terminology: decrease or increase in demand

Question 26

define normal good

Answer 26

any good for which there is a direct relationship between changes in income and its demand curve

Question 27

define inferior good

Answer 27

any good for which there is an inverse relationship between changes in income and its demand curve

Question 28

define a substitute good

Answer 28

a good that competes with another good for consumer purchases, as a result there is a direct relationship between a price change for one good and the demand for its competitor good

Question 29

define complementary good

Answer 29

a good that is jointly consumed with another good, as a result, there is an inverse relationship between a price change for one good and the demand for its go together good

Question 30

T or F only at a higher price will it be profitable for sellers to incur the higher opportunity cost assoc with producing and supplying a larger quantity

Answer 30

True

Question 31

what is a change in supply

Answer 31

an increase or a decrease in the quantity supplied at each possible price an increase in supply is a rightward shift in the entire supply curve. a decrease in supply is a leftward shift in the entire supply curve

Question 32

changes in nonprice determinants can not produce only a shift in the supply curve and not a movement along the supply curve T or F

Answer 32

False

Question 33

increase in price causes...

Answer 33

increase in quantity supplied

Question 34

change in nonprice determinant causes....

Answer 34

increase in supply

Question 35

define market

Answer 35

any arrangement in which buyers and sellers interact to determin the price and quantity of goods and services exchanged

Question 36

define surplus

Answer 36

a market condition existing at any price where the quantity supplied is greater than the quantity demanded

Question 37

define shortage

Answer 37

a market condition existing at any price where the quantity supplied is less than the quantity demanded

Question 38

define equilibrium

Answer 38

a market condition that occurs at any price and quantity where the quantity demanded and the quantity supplied are equal (market clearing)

Question 39

graphically the intersection of the supply curve and the demand curve is the market equilibrium price-quantity point. when all other non price factors are ......

Answer 39

held constant this is the only stable coordinate on the graph

Question 40

what is caused by quantity supplied exceeds quantity demanded and causes price decreases to equilibrium price

Answer 40

surplus results from and causes....

Question 41

what causation chain results in equilibrium price established

Answer 41

quantity demanded = quantity supplied causes neither surplus nor shortage causes equilibrium price established

Question 42

what causation chain involves shortage

Answer 42

quantity demanded exceeds quantity supplied causes shortage causes price increases to equilibrium price

Question 43

define price system

Answer 43

a mechanism that uses the forces of supply and demand to create an equilibrium through rising and falling prices