Chapter DEMAND AND SUPPLY - Chang Jung Christian …

1 C h a p t e r 3 DEMAND AND. SUPPLY . Topic: Price and Opportunity Cost Markets and Prices Skill: Analytical 4) The opportunity cost of good A in terms of good Topic: Price and Opportunity Cost Skill: Conceptual B is equal to the 1) A relative price is A) price of good A minus the price of good B. A) the slope of the DEMAND curve. B) price of good B minus the price of good A. B) the difference between one price and another. C) ratio of the price of good A to the price of good C) the slope of the SUPPLY curve. B. D) the ratio of one price to another. D) ratio of the price of good B to the price of good Answer: D A. Answer: C. Topic: Price and Opportunity Cost Skill: Conceptual Topic: Price and Opportunity Cost 2) If the price of a candy bar is $1 and the price of a Skill: Analytical fast food meal is $5, 5) The opportunity cost of a hot dog in terms of hamburgers is A) the relative price of a candy bar is 5 fast food meals.

2 A) the ratio of the slope of the DEMAND curve for B) the money price of a candy bar is 1/5 of a fast hot dogs to the slope of the DEMAND curve for food meal. hamburgers. C) the relative price of a fast food meal is 5 candy B) the ratio of the slope of the SUPPLY curve for hot bars. dogs to the slope of the SUPPLY curve for ham- D) the money price of a fast food meal is 1/5 of a burgers. candy bar. C) the price of a hot dog minus the price of a ham- Answer: C burger. D) the ratio of the price of a hot dog to the price of Topic: Price and Opportunity Cost a hamburger. Skill: Conceptual Answer: D. 3) If the price of a hot dog is $2 and the price of a hamburger is $4, A) the relative price of a hot dog is 1/2 of a ham- DEMAND burger. Topic: DEMAND B) the money price of a hot dog is 2 hamburgers. Skill: Recognition C) the relative price of a hamburger is 1/2 of a hot 6) Wants, as opposed to demands, dog.

3 A) are the unlimited desires of the consumer D) the money price of a hamburger is 2 hot dogs. B) are the goods the consumer plans to acquire. Answer: A C) are the goods the consumer has acquired. D) depend on the price. Answer: A. 93. 94 Chapter 3. Topic: DEMAND Topic: Law of DEMAND Skill: Conceptual Skill: Conceptual 7) Demands differ from wants in that 11) The law of DEMAND implies that, other things A) demands are unlimited, whereas wants are lim- remaining the same, ited by income. A) as the price of a cheeseburger rises, the quantity B) wants require a plan to acquire a good but de- of cheeseburgers demanded will increase. mands require no such plan. B) as the price of a cheeseburger rises, the quantity C) wants imply a decision about which demands to of cheeseburgers demanded will decrease. satisfy, while demands involve no specific plan C) as income increases, the quantity of cheeseburg- to acquire the good .

4 Ers demanded will increase. D) demands reflect a decision about which wants to D) as the DEMAND for cheeseburgers increases, the satisfy and a plan to buy the good , while wants price of a cheeseburger will fall. are unlimited and involve no specific plan to ac- Answer: B. quire the good . Answer: D Topic: Law of DEMAND Skill: Conceptual Topic: DEMAND 12) The law of DEMAND states that the quantity of a Skill: Conceptual good demanded varies 8) Scarcity guarantees that A) inversely with its price. A) demands will exceed wants. B) inversely with the price of substitute goods. B) wants will exceed demands. C) directly with income. C) demands will be equal to wants. D) directly with population. D) most demands will be satisfied. Answer: A. Answer: B. Topic: Law of DEMAND Topic: DEMAND Skill: Conceptual Skill: Recognition 13) Which of the following is consistent with the law 9) The quantity demanded is of DEMAND ?

5 A) always equal to the equilibrium quantity. A) An increase in the price of a tape causes an in- B) independent of the price of the good . crease in the quantity of tapes demanded. C) the amount of a good that consumers plan to B) An increase in the price of a soda causes a de- purchase at a particular price. crease in the quantity of soda demanded. D) independent of consumers' buying plans. C) A decrease in the price of a gallon of milk causes Answer: C a decrease in the quantity of milk demanded. D) A decrease in the price of juice causes no change Topic: Law of DEMAND in the quantity of juice demanded. Skill: Conceptual Answer: B. 10) The law of DEMAND states that, other things re- maining the same, the higher the price of a good , Topic: Law of DEMAND the Skill: Analytical A) smaller is the DEMAND for the good . 14) The law of DEMAND implies that if nothing else B) larger is the DEMAND for the good .

6 Changes, there is C) smaller is the quantity of the good demanded. A) a positive relationship between the price of a D) larger is the quantity of the good good and the quantity demanded. Answer: C B) a negative relationship between the price of a good and the quantity demanded. C) a linear relationship between price of a good and the quantity demanded. D) an exponential relationship between price of a good and the quantity demanded. Answer: B. DEMAND AND SUPPLY 95. Topic: DEMAND Curve and DEMAND Schedule Topic: Change in DEMAND , Prices of Related Goods Skill: Recognition Skill: Analytical 15) Which of the following influences people's buy- 19) A drop in the price of a compact disc shifts the ing plans and varies moving along a DEMAND DEMAND curve for prerecorded tapes leftward. curve? From that you know compact discs and prere- A) The price of the good . corded tapes are B) The prices of related goods.

7 A) complements. C) Income. B) substitutes. D) Preferences. C) inferior goods. Answer: A D) normal goods. Answer: B. Topic: DEMAND Curve and DEMAND Schedule Skill: Recognition Topic: Change in DEMAND , Prices of Related Goods 16) The law of DEMAND states that Skill: Recognition A) an increase in the price of a good shifts the de- 20) A substitute is a good mand curve leftward. A) that can be used in place of another good . B) a decrease in the price of a good shifts the de- B) that is not used in place of another good . mand curve leftward. C) of lower quality than another good . C) other thing remaining the same, the higher the D) of higher quality than another good . price of a good , the larger is the quantity de- Answer: A. manded. Topic: Change in DEMAND , Prices of Related Goods D) other things remaining the same, the higher the Skill: Conceptual price of a good , the smaller is the quantity de- 21) People buy more of good 1 when the price of manded.

8 good 2 rises. These goods are Answer: D. A) complements. Topic: DEMAND Curve and DEMAND Schedule B) substitutes. Skill: Conceptual C) normal goods. 17) The law of DEMAND implies that DEMAND curves D) inferior goods. A) slope down. Answer: B. B) slope up. Topic: Change in DEMAND , Prices of Related Goods C) shift rightward whenever the price rises. Skill: Recognition D) shift leftward whenever the price rises. 22) Which of the following pairs of goods are most Answer: A. likely substitutes? Topic: Willingness and Ability To Pay A) Compact discs and compact disc players. Skill: Conceptual B) Cola and lemon lime soda. 18) Each point on the DEMAND curve reflects C) Lettuce and salad dressing. A) all the wants of a given household. D) Peanut butter and gasoline. B) the highest price consumers are willing and able Answer: B. to pay for that particular unit of a good . Topic: Change in DEMAND , Prices of Related Goods C) the highest price sellers will accept for all units Skill: Analytical they are producing.

9 23) The DEMAND for a good increases when the price D) the lowest-cost technology available to produce a of a substitute ____ and also increases when the good . price of a complement ____. Answer: B. A) rises; rises B) rises; falls C) falls; rises D) falls; falls Answer: B. 96 Chapter 3. Topic: Change in DEMAND , Prices of Related Goods Topic: Change in DEMAND Skill: Recognition Skill: Analytical 24) A complement is a good 29) If income increases or the price of a complement A) of lower quality than another good . falls, B) used in conjunction with another good . A) the DEMAND curve for a normal good shifts left- C) used instead of another good . ward. D) of higher quality than another good . B) the DEMAND curve for a normal good shifts Answer: B rightward. C) the SUPPLY curve of a normal good shifts left- Topic: Change in DEMAND , Prices of Related Goods ward. Skill: Conceptual D) the SUPPLY curve of a normal good shifts right- 25) Suppose people buy more of good 1 when the ward.

10 Price of good 2 falls. These goods are Answer: B. A) complements. B) substitutes. Topic: Change in DEMAND C) normal. Skill: Analytical D) inferior. 30) If income decreases or the price of a complement Answer: A rises, A) the DEMAND curve for a normal good shifts left- Topic: Change in DEMAND , Prices of Related Goods ward. Skill: Analytical B) the DEMAND curve for a normal good shifts 26) As the opportunity cost of a good decreases, peo- rightward. ple buy C) there is an upward movement along the DEMAND A) less of that good and also less of its comple- curve for the good . ments. D) there is a downward movement along the de- B) less of that good but more of its complements. mand curve for the good . C) more of that good but less of its complements. Answer: A. D) more of that good and also more of its comple- ments. Topic: Change in DEMAND , Prices of Related Goods Answer: D Skill: Conceptual 31) A consumer might consider in-line skates and Topic: Change in DEMAND , Expected Future Prices elbow-pads to be Skill: Conceptual A) products with upward sloping DEMAND curves.