Chapter 4: The Market Forces Of Supply And Demand From Dean Beckford

Front 1

The forces that make market economies work are

Back 1

demand and supply

Front 2

Which of the following are the words most commonly used by economists?

Back 2

supply and demand

Front 3

In a market economy,

Back 3

supply and demand determine prices and, in turn, prices allocate scarce resources.

Front 4

In a market economy, supply and demand are important because they

Back 4

1. play a critical role in the allocation of the economy’s scarce resources
2. determine how much of each good gets produced
3. can be used to predict the impact on the economy of various events and policies

Front 5

A market is a

Back 5

group of buyers and sellers of a particular good or service

Front 6

For a market for a good or service to exist,

Back 6

there must be a group of buyers and sellers

Front 7

The term market always refers to

Back 7

a group of buyers and sellers of a particular good or service

Front 8

A group of buyers and sellers of a particular good or service is called a

Back 8

market

Front 9

A market is always characterized by

Back 9

the presence of buyers and sellers

Front 10

Which of the following statements is correct?

Back 10

Buyers determine demand and sellers determine supply

Front 11

For each good produced in a market economy, the interaction of demand and supply determines

Back 11

both the price of the good and the quantity of the good

Front 12

A competitive market is a market in which

Back 12

no individual buyer or seller has any significant impact on the market price

Front 13

The demand for a good or service is determined by

Back 13

those who buy the good or service

Front 14

A competitive market is one in which

Back 14

there are so many buyers and so many sellers that each has a negligible impact on the price of the product

Front 15

In a competitive market

Back 15

each seller has a limited degree of control over the price of his product

Front 16

In a competitive market, each seller has limited control over the price of his product because

Back 16

other sellers are offering similar products

Front 17

Most markets in the economy are

Back 17

highly competitive

Front 18

For a competitive market, which of the following statements is correct?

Back 18

If a seller charges more than the going price, buyers will go elsewhere to make their purchases

Front 19

Assume Teresa buys computers in a competitive market. Then

Back 19

None of the above is correct

Front 20

The highest form of competition is called

Back 20

perfect competition

Front 21

Which of the following is not a characteristic of a perfectly competitive market?

Back 21

1. Different sellers sell identical products
2. There are many sellers
3. Sellers must accept the price the market determines

Front 22

Which of the following is not a characteristic of a perfectly competitive market?

Back 22

Sellers possess market power

Front 23

The term price takers refers to buyers and sellers in

Back 23

perfectly competitive markets

Front 24

Buyers and sellers who have no influence on market price are referred to as

Back 24

price takers

Front 25

Price takers have no influence over prices in markets that feature

Back 25

numerous buyers and numerous sellers

Front 26

An example of a perfectly competitive market would be the

Back 26

soybean market

Front 27

The market for ice cream is

Back 27

a competitive market

Front 28

If a seller in a competitive market chooses to charge more than the market price, then

Back 28

buyers will tend to make purchases from other sellers

Front 29

If buyers and sellers in a certain market are price takers, then individually

Back 29

they have no influence on market price

Front 30

A monopoly is a market

Back 30

with one seller, and that seller sets the price

Front 31

Which of the following would most likely serve as an example of a monopoly?

Back 31

a local cable television company

Front 32

Despite the fact that not all markets are perfectly competitive, the study of perfect competition is worthwhile, in part because

Back 32

some degree of competition is present in most markets, not just in perfectly competitive markets

Front 33

To say that the quantity demanded of a good is negatively related to the price of the good is to say that

Back 33

an increase in the price of the good leads to a decrease in the quantity demanded of the good

Front 34

Quantity demanded falls as the price rises and rises as the price falls, so we say that

Back 34

quantity demanded is negatively related to the price

Front 35

The negative relationship between price and quantity demanded

Back 35

1. applies to most goods in the economy
2. is represented by a downward-sloping demand curve
3. is referred to as the law of demand

Front 36

Which of the following would not be a determinant of the demand for a particular good?

Back 36

the prices of the inputs used to produce the good

Front 37

Each of the following is a determinant of demand except

Back 37

technology

Front 38

The amount of the good buyers are willing and able to purchase is called the

Back 38

quantity demanded

Front 39

If a good is normal, then an increase in income will result in

Back 39

an increase in the demand for the good

Front 40

If Francis experiences a decrease in his income, we would expect that, as a result, Francis’s demand for

Back 40

normal goods will decrease

Front 41

You lose your job and as a result you buy fewer romance novels. This shows that you consider romance novels to be a(n)

Back 41

normal good

Front 42

Currently you purchase 6 packages of hot dogs a month. You will graduate from college in December and you will start a new job in January. You have no plans to purchase hot dogs in January. For you, hot dogs are

Back 42

an inferior good

Front 43

Two goods are substitutes if a decrease in the price of one good

Back 43

decreases the demand for the other good

Front 44

Two goods are complements if a decrease in the price of one good

Back 44

increases the demand for the other good

Front 45

A likely example of complementary goods for most people would be

Back 45

hamburgers and French fries

Front 46

A likely example of substitute goods for most people would be

Back 46

pencils and pens

Front 47

Which of the following statements about people’s tastes is correct?

Back 47

Generally, economists are interested in how changes in people’s tastes affect markets

Front 48

When it comes to people's tastes, economists generally believe that

Back 48

tastes are based on historical and psychological forces

Front 49

Economists in general

Back 49

do not try to explain people's tastes, but they do try to explain what happens when tastes change

Front 50

Suppose today people change their expectations about the future. This change in expectations

Back 50

can affect today’s demand

Front 51

You love peanut butter. You hear on the news that 50 percent of the peanut crop in the South has been w

Back 51

your demand for peanut butter increases today

Front 52

Ford Motor Company announces that it will offer $3,000 rebates on new Mustangs starting next month. As a result of this information, today’s demand curve for Mustangs

Back 52

shifts to the left

Front 53

Suppose you like to make, from scratch, pies filled with banana cream and vanilla pudding. You notice that the price of bananas has increased. How would this price increase affect your demand for vanilla pudding?

Back 53

It would decrease

Front 54

Alyssa rents 5 movies per month when the price is $3.00 per rental and 7 movies per month when the price is $2.50 per rental. Alyssa’s demand demonstrates the law of

Back 54

demand

Front 55

According to the law of demand,

Back 55

price and quantity demanded are negatively related

Front 56

The law of demand says that

Back 56

an increase in price causes quantity demanded to decrease

Front 57

Which of the following demonstrates the law of demand?

Back 57

Dave buys more donuts at $0.25 per donut than at $0.50 per donut, other things equal

Front 58

A downward-sloping demand curve reflects

Back 58

the law of demand

Front 59

The negative relationship between price and quantity demanded

Back 59

1. applies to most goods in the economy
2. is represented by a downward-sloping demand curve
3. is referred to as the law of demand

Front 60

A higher price for batteries would result in a(n)

Back 60

decrease in the demand for flashlights

Front 61

If a decrease in income increases the demand for a good, then the good is

Back 61

an inferior good

Front 62

Which of the following is not a determinant of demand?

Back 62

the price of a resource that is used to produce the good

Front 63

What will happen in the rice market if buyers are expecting higher rice prices in the near future?

Back 63

The demand for rice will increase

Front 64

A table that shows the relationship between the price of a good and the quantity demanded of that good is called a(n)

Back 64

demand schedule

Front 65

A demand schedule is a table showing the relationship between

Back 65

price and quantity demanded

Front 66

A demand schedule is a table showing the relationship between

Back 66

price and quantity demanded, and those quantities are usually negatively related

Front 67

With respect to the variables price and quantity demanded,

Back 67

price is the independent variable and quantity demanded is the dependent variable

Front 68

When constructing a demand curve,

Back 68

price is on the vertical axis and quantity demanded is on the horizontal axis

Front 69

The line that relates the price of a good to the quantity demanded of that good is called the

Back 69

demand curve, and it usually slopes downward

Front 70

The line that relates the price of a good to the quantity demanded of that good is called the

Back 70

demand curve, and it slopes downward as long as the good in question conforms to the law of demand

Front 71

A downward-sloping demand curve illustrates the

Back 71

law of demand

Front 72

The demand curve for a good is

Back 72

a line that relates the price to quantity demanded

Front 73

When we move along a given demand curve,

Back 73

all nonprice determinants of demand are held constant

Front 74

Which of the following changes would not shift the demand curve for a good or service?

Back 74

a change in the price of the good or service

Front 75

Which of the following would not affect an individual's demand curve?

Back 75

the number of buyers

Front 76

When the number of buyers in a market increases,

Back 76

1. the market demand curve shifts to the right
2. the demand curves of the individual demanders in the market are unaffected
3. the market demand for the good in question increases

Front 77

If the number of buyers in the market decreases, the

Back 77

market demand will decrease

Front 78

When the law of demand applies to a good, then

Back 78

1. the quantity demanded of the good is negatively related to the price of the good
2. the demand curve for the good slopes downward
3. when the price of the good falls, the quantity demanded of the good rises

Front 79

The market demand curve

Back 79

represents the sum of the quantities demanded by all the buyers at each price of the good

Front 80

. Suppose Spencer and Kate are the only two demanders of lemonade. Each month, Spencer buys six glasses of
lemonade when the price is $1.00 per glass, and he buys four glasses when the price is $1.50 per glass. Each
month, Kate buys four glasses of lemonade when the price is $1.00 per glass, and she buys two glasses when the
price is $1.50 per glass. Which of the following points is on the market demand curve?

Back 80

(quantity demanded = 10, price = $1.00)

Front 81

An increase in demand is represented by

Back 81

a rightward shift of a demand curve

Front 82

Pizza is a normal good if

Back 82

the demand for pizza rises when income rises

Front 83

Today's demand curve for gasoline could shift in response to

Back 83

a change in the expected future price of gasoline

Front 84

Which of the following events could shift the demand curve for gasoline to the left?

Back 84

Public service announcements are run on television, encouraging people to walk or ride bicycles instead of
driving cars

Front 85

The sum of all individual demand curves for a product is called

Back 85

market demand

Front 86

The market demand is

Back 86

the sum of all individual demands

Front 87

To find the market demand for a product, individual demand curves are summed

Back 87

horizontally

Front 88

A market demand curve

Back 88

is derived by a horizontal summation of individual demand curves

Front 89

A market demand curve represents

Back 89

how much of a good all buyers are willing and able to buy at each possible price

Front 90

Suppose the American Medical Association announces that men who shave their heads are less likely to die of heart failure. We could expect the current demand for

Back 90

razors to increase

Front 91

Suppose scientists provide evidence to the effect that chocolate pudding increases cholesterol. We would expect to see

Back 91

a decrease in the demand for chocolate pudding

Front 92

If buyers today become more willing and able than before to purchase larger quantities of Vanilla Coke at each price of Vanilla Coke,

Back 92

the demand curve for Vanilla Coke will shift to the right

Front 93

Once the demand curve for a product or service is drawn, it

Back 93

can shift either rightward or leftward

Front 94

Once the demand curve for a product or service is drawn, it

Back 94

can shift either rightward or leftward.

Front 95

When the price of a good or service changes,

Back 95

there is a movement along a given demand curve

Front 96

Suppose that Carolyn receives a pay increase. We would expect

Back 96

Carolyn's demand for inferior goods to decrease

Front 97

Nancy likes pasta today more than she did yesterday. This fact leads us to conclude that

Back 97

Nancy is now willing to pay more than before for pasta at each relevant price of pasta

Front 98

A very hot summer in Atlanta will cause

Back 98

the demand for jackets to decrease

Front 99

If a study by medical researchers found that brown sugar caused weight loss while white sugar caused weight gain
we likely would see

Back 99

an increase in demand for brown sugar and a decrease in demand for white sugar

Front 100

Warrensburg is a small college town in Missouri. At the end of August each year, the market demand for fast food in Warrensburg

Back 100

increases

Front 101

Which of these statements best represents the law of demand?

Back 101

When the price of a good falls, buyers respond by purchasing more of the good

Front 102

An increase in the number of college scholarships issued by private foundations would

Back 102

increase the demand for education

Front 103

When quantity demanded decreases at every possible price, we know that the demand curve has

Back 103

shifted to the lef

Front 104

When quantity demanded has increased at every price, it might be because

Back 104

the price of a complementary good has decreased

Front 105

The demand curve for textbooks shifts

Back 105

when a determinant of the demand for textbooks other than the price of textbooks changes

Front 106

The demand curve for hot dogs

Back 106

does not shift when the price of hot dogs changes, because the price of hot dogs is measured on the vertical axis
of the graph

Front 107

Most studies indicate that tobacco and marijuana tend to be

Back 107

complements

Front 108

The belief that tobacco is a “gateway drug” is consistent with

Back 108

most of the available evidence

Front 109

For teens, a 10 percent increase in the price of cigarettes leads to a

Back 109

12 percent drop in teenage smoking

Front 110

For which of the following groups of people does a 10 percent increase in the price of cigarettes lead to a decrease in the quantity demanded of cigarettes that exceeds 10 percent?

Back 110

teenagers

Front 111

The side of the market that deals with the willingness and ability to produce and sell is

Back 111

supply

Front 112

The relationship between price and quantity supplied is

Back 112

positive

Front 113

According to the law of supply,

Back 113

the supply curve for a good is upward-sloping

Front 114

Which of the following events would cause a movement upward and to the right along the supply curve for
tomatoes?

Back 114

The price of tomatoes rises

Front 115

A decrease in the supply of televisions is represented by

Back 115

a leftward shift of the supply curve for televisions

Front 116

Which of the following events could cause an increase in the supply of ceiling fans?

Back 116

The number of sellers of ceiling fans increases

Front 117

Other things equal, when the price of a good rises, the

Back 117

quantity supplied of the good increases

Front 118

If the price of a good is low,

Back 118

the quantity supplied of the good could be zero

Front 119

The supply schedule is a table that shows the relationship between

Back 119

price and quantity supplied

Front 120

The difference between a supply schedule and a supply curve is that

Back 120

a supply schedule is a table and a supply curve is drawn on a graph

Front 121

A market supply curve is determined by

Back 121

horizontally summing individual supply curves

Front 122

The market supply curve shows

Back 122

the total quantity supplied at all possible prices

Front 123

For a seller, which of the following quantities are not positively related?

Back 123

the seller's profit and production costs

Front 124

The positive relationship between price and quantity supplied is called

Back 124

the law of supply

Front 125

The supply of a good is negatively related to the

Back 125

price of inputs used to make the good

Front 126

“Other things equal, when the price of a good rises, the quantity supplied of the good rises also.” This is a
statement of the law of

Back 126

supply

Front 127

If the number of sellers in a market increases, the

Back 127

supply in that market will increase

Front 128

A decrease in the number of sellers in the market causes

Back 128

the supply curve to shift to the left

Front 129

Which of the following is a determinant of market supply curve but not a determinant of an individual seller’s
supply?

Back 129

the number of sellers

Front 130

A movement along the supply curve might be caused by a change in

Back 130

the price of the good or service that is being supplied

Front 131

Lead is an important input in the production of crystal. If the price of lead decreases, other things equal, we would
expect the supply of

Back 131

crystal to increase

Front 132

Suppose you make jewelry. If the price of gold falls, we would expect you to

Back 132

be willing and able to produce more jewelry than before at each possible price

Front 133

A technological advance will shift the

Back 133

supply curve to the right

Front 134

An advance in production technology will

Back 134

shift the supply curve to the right, but the demand curve will be unaffected

Front 135

A dress manufacturer recently has come to expect higher prices for dresses in the near future. We would expect

Back 135

the dress manufacturer to supply fewer dresses now than it was supplying previously

Front 136

Holding the nonprice determinants of supply constant, a change in price would

Back 136

result in a movement along a stationary supply curve

Front 137

A supply curve slopes upward because

Back 137

an increase in price gives producers an incentive to supply a larger quantity

Front 138

Which of the following events could shift both the demand curve and the supply curve for a good?

Back 138

Everyone revises upward their expectation of next month’s price of the good

Front 139

An increase in the price of rubber coincides with an advance in the technology of tire production. As a result of these two events,

Back 139

none of the above is necessarily correct

Front 140

In a market, to find the total amount supplied at a particular price,

Back 140

we must add up all of the amounts that firms are willing and able to supply at that price

Front 141

When we compare an increase in supply with an increase in quantity supplied, we know that

Back 141

both are always caused by a change in the number of market participants

Front 142

A leftward shift of a supply curve is called

Back 142

a decrease in supply

Front 143

Workers at a bicycle assembly plant currently earn the mandatory minimum wage. If the federal government
increases the minimum wage by $1.00 an hour it is likely that the

Back 143

supply of bicycles will shift to the lef

Front 144

If car manufacturers begin utilizing new labor-saving technology on their assembly lines, we would not expect

Back 144

individual car manufacturers to move up and to the right along their individual supply curves

Front 145

Recent forest fires in the western states are expected to cause the price of lumber to rise in the next 6 months. As a
result we can expect the supply of lumber to

Back 145

fall now

Front 146

If suppliers expect the price of their product to fall in the future they will

Back 146

increase supply now

Front 147

Funsters, Inc., the largest toy company in the country, sells its most popular doll for $15. It has just learned that its leading competitor Toysorama is mass producing an excellent copy and plans to flood the market with their $5 doll in 6 weeks. Funsters should

Back 147

increase the supply of their doll now before the other doll hits the market

Front 148

Suppose there is an increase in steel prices. We would expect the supply curve for steel barrels

Back 148

to shift leftward

Front 149

Suppose there is an increase in steel prices. We would expect the supply curve for steel barrels

Back 149

to shift leftward

Front 150

An increase in the price of a good would

Back 150

give producers an incentive to produce more

Front 151

A decrease in the price of a good would

Back 151

increase the quantity demanded of the good

Front 152

Wheat is the main input in the production of flour. If the price of wheat decreases, all else equal, we would expect
the

Back 152

supply of flour to increase

Front 153

An increase in the price of oranges would lead to

Back 153

a movement up and to the right along the supply curve for oranges

Front 154

The unique point at which the supply and demand curves intersect is called

Back 154

equilibrium

Front 155

The dictionary defines equilibrium as a situation in which forces

Back 155

balance

Front 156

The price at which quantity supplied equals quantity demanded is called the

Back 156

equilibrium price

Front 157

Another term for equilibrium price is

Back 157

market-clearing price

Front 158

If, at the current price, there is a shortage of a good,

Back 158

the price is below the equilibrium price

Front 159

A decrease in input costs to firms in a market will result in

Back 159

a decrease in equilibrium price and an increase in equilibrium quantity

Front 160

In markets, prices move toward equilibrium because of

Back 160

the actions of buyers and sellers

Front 161

When the price of a good is higher than the equilibrium price,

Back 161

sellers desire to produce and sell more than buyers wish to purchase

Front 162

Suppose roses are currently selling for $40.00 per dozen, while the equilibrium price of roses is $30.00 per dozen. We would expect a

Back 162

surplus to exist and the market price of roses to decrease

Front 163

A surplus exists in a market if

Back 163

the current price is above its equilibrium price

Front 164

If a surplus exists in a market we know that the actual price is

Back 164

above equilibrium price and quantity supplied is greater than quantity demanded

Front 165

If excess demand exists in a market we know that the actual price is

Back 165

below equilibrium price and quantity demanded is greater than quantity supplied

Front 166

Step one in the Three-Step program for analyzing changes in equilibrium is as follows:

Back 166

Decide whether the event shifts the supply or demand curve

Front 167

You have been asked by your economics professor to graph the market for lumber and then to analyze the change that would occur in equilibrium price as a result of recent forest fires in the west. Your first step would be to

Back 167

decide whether the fires affected demand or supply

Front 168

Suppose there is an earthquake that destroys several corn canneries. Which of the following would not be a direct result of this event?

Back 168

Buyers would not be willing to buy as much as before at each relevant price

Front 169

If goods A and B are complements, then an increase in the price of good A will result in

Back 169

less of good B being sold

Front 170

Holding all other things constant, a higher price for ski lift tickets would

Back 170

decrease the number of skis sold

Front 171

Which of the following events will definitely cause equilibrium quantity to fall?

Back 171

demand and supply both decrease

Front 172

If the demand for a product increases, we would expect

Back 172

equilibrium price and equilibrium quantity both to increase

Front 173

If the demand for a product decreases, we would expect

Back 173

equilibrium price and equilibrium quantity to both decrease

Front 174

If the supply of a product increases, we would expect

Back 174

equilibrium price to decrease and equilibrium quantity to increase

Front 175

If the supply of a product decreases, we would expect

Back 175

equilibrium price to increase and equilibrium quantity to decrease

Front 176

Suppose the number of buyers in a market increases and a technological advancement occurs also. What would we expect to happen in the market?

Back 176

Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous

Front 177

Suppose that demand decreases and supply decreases. What would you expect to occur in the market for the good?

Back 177

Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous

Front 178

Which of the following events would result in an increase in equilibrium price and an ambiguous change in equilibrium quantity?

Back 178

a decrease in supply and an increase in demand

Front 179

Suppose that a decrease in the price of good X results in fewer units of good Y being sold. This implies that X and Y are

Back 179

substitute goods

Front 180

A weaker demand together with a stronger supply would necessarily result in

Back 180

a lower price

Front 181

Which of the following events would cause the price of oranges to fall?

Back 181

The price of land throughout Florida decreases, and Florida produces a significant proportion of the nation’s oranges

Front 182

Which of the following quantities would increase in response to a decrease in the price of ironing boards?

Back 182

1. the quantity of irons demanded at each possible price of irons
2. the equilibrium quantity of irons
3. the equilibrium price of irons

Front 183

In a given market, how are the equilibrium price and the market-clearing price related?

Back 183

They are the same price

Front 184

The current price of neckties is $30 and the equilibrium price of neckties is $25. As a result,

Back 184

1. the quantity supplied of neckties exceeds the quantity demanded of neckties at the $30 price
2. the equilibrium quantity of neckties exceeds the quantity demanded at the $30 price
3. There is a surplus of neckties at the $30 price.

Front 185

The law of supply and demand asserts that

Back 185

the price of a good will eventually rise in response to an excess demand for that good

Front 186

Suppose buyers of computers and printers regard those two goods as complements. Then an increase in the price of computers will cause

Back 186

a decrease in the demand for printers and a decrease in the quantity supplied of printers

Front 187

During the last few decades in the United States, health officials have argued that eating too much beef might be harmful to human health. As a result, there has been a significant decrease in the amount of beef produced. Which of the following best explains the decrease in production?

Back 187

Individual consumers, concerned about their own health, decreased their demand for beef, which lowered the
relative price of beef, making it less attractive to produce

Front 188

What will happen to the equilibrium price and quantity of traditional camera film if traditional cameras become more expensive, digital cameras become cheaper, the cost of the resources needed to manufacture traditional film falls and more firms decide to manufacture traditional film?

Back 188

Price will fall and the effect on quantity is ambiguous

Front 189

Which of the following events would result in an increase in equilibrium price and an ambiguous change in equilibrium quantity?

Back 189

a decrease in supply and an increase in demand

Front 190

Good X and good Y are substitutes. If the price of good Y increases, then the

Back 190

demand for good X will increase

Front 191

Suppose that a decrease in the price of good X results in fewer units of good Y being sold. This implies that X and Y are

Back 191

substitute goods

Front 192

When supply and demand both increase, equilibrium

Back 192

price may increase, decrease, or remain unchanged

Front 193

If there is a shortage of farm laborers, we would expect

Back 193

he wages of farm laborers to increase

Front 194

Which of the following events would cause both the equilibrium price and equilibrium quantity of number two grade potatoes (an inferior good) to increase?

Back 194

a decrease in consumer income

Front 195

Which of the following events would unambiguously cause a decrease in the equilibrium price of cotton shirts?

Back 195

a decrease in the price of wool shirts and a decrease in the price of raw cotton

Front 196

What would happen to the equilibrium price and quantity of coffee if the wages of coffee-bean pickers fell and the price of tea fell?

Back 196

Price will fall and the effect on quantity is ambiguous

Front 197

New oak tables are normal goods. What would happen to the equilibrium price and quantity in the market for oak tables if the price of maple tables rises, the price of oak wood rises, more buyers enter the market for oak tables and the price of wood saws increased?

Back 197

Price will rise and the effect on quantity is ambiguous

Front 198

What will happen to the equilibrium price and quantity of new cars if the price of gasoline rises, the price of steel rises, public transportation becomes cheaper and more comfortable, and auto-workers negotiate higher wages?

Back 198

Quantity will fall and the effect on price is ambiguous

Front 199

Music compact discs are normal goods. What will happen to the equilibrium price and quantity of music compact discs if musicians accept lower royalties, compact disc players become cheaper, more firms start producing music compact discs and music lovers experience an increase in income?

Back 199

Quantity will rise and the effect on price is ambiguous

Front 200

New cars are normal goods. What will happen to the equilibrium price of new cars if the price of gasoline rises, the price of steel falls, public transportation becomes cheaper and more comfortable, auto-workers accept lower wages and automobile insurance becomes more expensive?

Back 200

Price will fall

Front 201

What will happen to the equilibrium price of new textbooks if more students attend college, paper becomes cheaper, textbook authors accept lower royalties and fewer used textbooks are sold?

Back 201

The price change will be ambiguous

Front 202

Consider the market for new DVDs. If DVD players became cheaper, buyers expected DVD prices to fall next year, used DVDs became more expensive, and DVD production technology improved, then we could safely conclude that the equilibrium price of a new DVD would

Back 202

We couldn't be sure what it might do

Front 203

What would happen to the equilibrium price and quantity of peanut butter if the price of peanuts went up, the price of jelly (a complementary good) fell, fewer firms decided to produce peanut butter, and health officials announced
that eating peanut butter was good for you?

Back 203

Price will rise and the effect on quantity is ambiguous

Front 204

Pens are normal goods. What will happen to the equilibrium price of pens if the price of pencils rises, consumers
experience an increase in income, writing in ink becomes fashionable, people expect the price of pens to rise in the
near future, the population increases, fewer firms manufacture pens, and the wages of pen-makers increase?

Back 204

Price will rise

Front 205

Pens are normal goods. What will happen to the equilibrium price of pens if the price of pencils rises, consumers experience an increase in income, writing in ink becomes fashionable, people expect the price of pens to fall in the near future, the population increases, fewer firms manufacture pens, and the wages of pen-makers decrease?

Back 205

The price change will be ambiguous

Front 206

Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time.
Which of the following explanations would be most consistent with this observation?

Back 206

New medical evidence has been released that indicates a negative correlation between a person’s beef consumption and his or her longevity

Front 207

Which of the following sets of events would most likely cause an increase in the price of a new house?

Back 207

higher wages for carpenters, higher wood prices, increases in consumer incomes, higher apartment rents, increases in population and expectations of higher house prices in the future

Front 208

Suppose that demand for a good increases and, at the same time, supply of the good decreases. What would happen in the market for the good?

Back 208

Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous

Front 209

Suppose the incomes of buyers in a market for a particular normal good decrease and there is also a reduction in input prices. What would we expect to occur in this market?

Back 209

The equilibrium price would decrease, but the impact on the amount sold in the market would be ambiguous

Front 210

Which of the following events would definitely result in a higher price in the market for Snickers?

Back 210

Demand for Snickers increases and supply of Snickers decreases

Front 211

An early frost in the vineyards of Napa Valley would cause

Back 211

a decrease in the supply of wine, increasing price

Front 212

The signals that guide the allocation of resources in a market economy are

Back 212

prices

Front 213

Which of these statements does not apply to market economies?

Back 213

Prices ensure that anyone who wants a product can get it