Quiz 1 – Supply and Demand

Quiz 1 – Supply and Demand 1. Which of the following changes might cause a product's demand curve to shift to the left? a. An increase in the product's price b. An increase in incomes c. Both A and B d. None of the above 2. Which of the following changes might cause a product's demand curve to shift to the right? a. An increase in population b. An increase in incomes c. Both A and B d. None of the above 3. Which of the following changes might cause a product's supply curve to shift to the left? a. A change in technology b. An change in productivity c. Both A and B d. None of the above 4. Which of the following changes might cause a product's supply curve to shift to the right? a. A change in technology b. An change in productivity c. Both A and B d. None of the above 5. A list showing the different amounts of a product that consumers would want to buy at various prices is called: a. Quantity demanded b. Demand schedule c. Demand curve d. Demand 6. Which of the following would be an example of the law of demand? a. When Coke's price increases the quantity of Pepsi demanded will increase b. When Coke's price increases the quantity of Pepsi demanded will decrease c. When Pepsi's price increases the quantity of Pepsi demanded will increase d. When Pepsi's price increases the quantity of Pepsi demanded will decrease 7. Incomes increase. What else would we need to know before we could determine the impact this change would have on the demand curve for soy milk? a. Whether soy milk is a normal good or an inferior good b. Whether soy milk is a substitute in consumption or a complement in consumption c. Whether soy milk is supplied or demanded d. We already have enough information to determine the impact on the demand curve 8. The price of cucumbers rises. What else would we need to know before we could determine the impact this change would have on the demand curve for tomatoes? a. Whether tomatoes are a normal good or an inferior good b. Whether cucumbers and tomatoes are substitutes in consumption or complements in consumption c. Whether tomatoes are supplied or demanded d. We already have enough information to determine the impact on the demand curve 9. The price of printer paper rises. What else would we need to know before we could determine the impact this change would have on the demand curve for printer paper? a. Whether printer paper is a normal good or an inferior good b. Whether printer paper is a substitute in consumption or a complement in consumption c. Whether printer paper is supplied or demanded d. We already have enough information to determine the impact on the demand curve 10. Technology changes. What else would we need to know before we could determine the impact this change would have on the supply curve for tennis balls? a. Whether tennis balls are a normal good or an inferior good b. Whether tennis balls are substitutes in production or complements in production c. Whether tennis balls are supplied or demanded d. We already have enough information to determine the impact on the supply curve 11. In the process of restoring equilibrium, the price of grapes rises. As a result: a. The supply curve will shift to the right. b. The demand curve will shift to the left. c. Both A and B d. None of the above 12. According to the Law of Market Forces, if the market for gasoline currently has a shortage... a. The market price will rise. b. The market price will fall. c. The equilibrium price will rise. d. The equilibrium price will fall. 13. If Spam is an inferior good, how would an increase in incomes affect the market for Spam? a. The supply curve would shift to the left b. The supply curve would shift to the right c. The demand curve would shift to the left d. The demand curve would shift to the right 14. If Spam is an inferior good, how would an increase in incomes affect the market for Spam? a. The equilibrium price would rise and the equilibrium quantity would rise b. The equilibrium price would rise but the equilibrium quantity would fall c. The equilibrium price would fall but the equilibrium quantity would rise d. The equilibrium price would fall and the equilibrium quantity would fall 15. Steel is a major ingredient in the production of cars. If the price of steel rises, what would happen in the market for cars? a. The supply curve would shift to the left b. The supply curve would shift to the right c. The demand curve would shift to the left d. The demand curve would shift to the right 16. Steel is a major ingredient in the production of cars. If the price of steel rises, what would happen in the market for cars? a. The equilibrium price would rise and the equilibrium quantity would rise b. The equilibrium price would rise but the equilibrium quantity would fall c. The equilibrium price would fall but the equilibrium quantity would rise d. The equilibrium price would fall and the equilibrium quantity would fall 17. A new type of chainsaw increases the productivity of loggers who make lumber. How would this affect the market for lumber? a. The supply curve would shift to the left b. The supply curve would shift to the right c. The demand curve would shift to the left d. The demand curve would shift to the right 18. A new type of chainsaw increases the productivity of loggers who make lumber. How would this affect the market for lumber? a. The equilibrium price would rise and the equilibrium quantity would rise b. The equilibrium price would rise but the equilibrium quantity would fall c. The equilibrium price would fall but the equilibrium quantity would rise d. The equilibrium price would fall and the equilibrium quantity would fall 19. If oranges and grapefruit are substitutes in consumption, how would an increase in the price of oranges affect the market for grapefruit? a. The supply curve would shift to the left b. The supply curve would shift to the right c. The demand curve would shift to the left d. The demand curve would shift to the right 20. If oranges and grapefruit are substitutes in consumption, how would an increase in the price of oranges affect the market for grapefruit? a. The equilibrium price would rise and the equilibrium quantity would rise b. The equilibrium price would rise but the equilibrium quantity would fall c. The equilibrium price would fall but the equilibrium quantity would rise d. The equilibrium price would fall and the equilibrium quantity would fall 21. If hot dogs and pork chops are complements in production, how would a decrease in the price of hot dogs affect the market for pork chops? a. The supply curve would shift to the left b. The supply curve would shift to the right c. The demand curve would shift to the left d. The demand curve would shift to the right 22. If hot dogs and pork chops are complements in production, how would a decrease in the price of hot dogs affect the market for pork chops? a. The equilibrium price would rise and the equilibrium quantity would rise b. The equilibrium price would rise but the equilibrium quantity would fall c. The equilibrium price would fall but the equilibrium quantity would rise d. The equilibrium price would fall and the equilibrium quantity would fall 23. At a price of $3 per gallon, the quantity demanded for milk is 8,000 gallons and the quantity supplied for milk is 12,000 gallons. The equilibrium price for milk must be: a. More than $3 per gallon b. Exactly $3 per gallon c. Less than $3 per gallon d. It cannot be determined by the information given 24. At a price of $3 per gallon, the quantity demanded for milk is 8,000 gallons and the quantity supplied for milk is 12,000 gallons. The equilibrium quantity of milk must be: a. Less than or equal to 8,000 gallons b. Between 8,000 gallons and 12,000 gallons c. Equal to or greater than 12,000 gallons d. It cannot be determined by the information given 25. At a price of $3 per gallon, the quantity demanded for milk is 8,000 gallons and the quantity supplied for milk is 12,000 gallons. At a price of $3 per gallon, the market for milk would have: a. A shortage b. An equilibrium c. A surplus d. It cannot be determined by the information given ANSWERS: 1. B: for inferior goods, an increase in income would cause a decrease in demand. “A” cannot be correct since changing a product’s price does not shift that product’s demand curve. 2. C: population increases always increase the demand for a product, and an increase in income would increase the product’s demand if it were a normal good. 3. B: since changing technology can only ever INCREASE output, it cannot shift the supply curve to the left. If productivity fell that would decrease production. 4. C: all technology changes shift the supply curve to the right, and an increase in productivity would do the same. 5. B: this is the definition of the term “demand schedule.” 6. D: the law of demand states that, ceteris paribus, an increase in a product’s price would decrease that product’s quantity demanded. 7. A: increasing income would shift the demand curve for normal goods to the right, but it would shift the demand curve for inferior goods to the left. 8. B: a product’s demand curve would shift to the right when the price of a substitute in consumption rises but it would shift to the left when the price of a complement in consumption rises. 9. D: if all that is changing is the price of the product then we know everything we need to know about what will happen to the demand curve – it will not shift. 10. D: a technological change always shifts the product’s supply curve to the right. 11. D: changing a product’s price will not shift that product’s supply curve or demand curve. This change will cause movement along both curves (changing quantity supplied and quantity demanded), but the curves themselves will not shift. 12. A: shortages and surpluses do not shift curves, so the equilibrium price will not change. A shortage will cause the market price to rise, moving the market along both its supply curve (increasing quantity supplied) and its demand curve (decreasing quantity demanded) to eliminate the shortage. 13. C: the relevant market is the market for spam. Income changes affect a product’s demand curve. Rising incomes make consumers less interested in buying inferior goods, so the demand curve will shift to the left. 14. D: when the demand curve shifts to the left both the equilibrium price and the equilibrium quantity will fall. 15. A: the relevant market is the market for cars. Changing the price of an ingredient affects a product’s supply curve. When an ingredient’s price rises profits fall and businesses become less interested in producing the product, so the supply curve will shift to the left. 16. B: when the supply curve shifts to the left the equilibrium price rises but the equilibrium quantity falls. 17. B: the relevant market is the market for lumber. Changing the productivity of inputs affects a product’s supply curve. When input productivity rises producers are able to make the product using fewer resources; this lowers the production costs, increasing profits. As a result, the supply curve will shift to the right. 18. C: when the supply curve shifts to the right the equilibrium price falls but the equilibrium quantity rises. 19. D: the relevant market is the market for grapefruit. Changing the price of a substitute in consumption affects a product’s demand curve. When the price rises for oranges consumers become less interested in buying oranges and more interested in buying their replacement product (grapefruit). As a result, the demand curve for grapefruit will shift to the right. 20. A: when the demand curve shifts to the right the equilibrium price and the equilibrium quantity both rise. 21. A: the relevant market is the market for pork chops. Changing the price of a complement in production affects a product’s supply curve. When the price of hot dogs falls producers become less interested in making hot dogs. (Remember: don’t confuse the words “price” and “cost”: a decrease in the product’s price means producers earn less money from making the product and are therefore less interested in producing it.) When producers make less hot dogs they will also make less of the companion product, so the supply curve for pork chops will shift to the left. 22. B: when the supply curve shifts to the left the equilibrium price will rise but the equilibrium quantity will fall. 23. C: QD < QS at a price of $3, so the equilibrium price must be lower than $3. 24. B: the price must fall to reach equilibrium; as it does, the quantity demanded will rise and the quantity supplied will fall. The equilibrium will therefore be reached somewhere between 8,000 and 12,000 gallons. 25. C: a surplus is defined as a situation where QD < QS.