427)
The price of a loaf of bread is $1.50, the price of a gallon of milk is $3.00, and the price of a pound of
butter is $2.40. The price of a loaf of bread relative to a gallon of milk is ________, while the price of
a gallon of milk relative to a pound of butter is ________.
427)
A)
2.0; 0.8.
B)
0.5; 0.8.
C)
0.5; 1.25.
D)
2.0; 1.25.
428)
Which of the following statements is FALSE?
428)
A)
An increase in income causes a decrease in the demand for an inferior good.
B)
An increase in income causes an increase in the demand for a normal good.
C)
An increase in income causes the demand curve for an inferior good to shift to the right.
D)
A decrease in income causes the demand curve for a normal good to shift to the left.
429)
The price of a new textbook is $60 in one year and $75 two years later, while the price of a used
copy of the textbook increased from $25 to $37.50. The relative price of a new textbook
429)
A)
decreased from 1.4 to 1.25
B)
decreased from 2.4 to 2.0.
C)
increased from 2.4 to 3.
D)
increased by 25 percent.
430)
Refer to the above figure. Which panel demonstrates the law of demand?
430)
A)
Panel A
B)
Panel B
C)
Panel C
D)
Panel D
431)
If bagels and croissants are substitute goods, which of the following is likely to occur if the price of
bagels has decreased?
431)
A)
The demand curve for croissants shifts to the right.
B)
The demand curve for bagels shifts to the right.
C)
A leftward movement along the bagel demand curve.
D)
The demand curve for croissants shifts to the left.
432)
Other things being equal, the relationship between price and quantity supplied is
432)
A)
positive.
B)
constant.
C)
non–existent.
D)
negative.
433)
Refer to the above figure. Which panel shows the effect of an increase in the price of a good on the
demand curve of that good?
433)
A)
Panel A
B)
Panel B
C)
both panels
D)
neither panel
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
434)
Distinguish between a change in quantity supplied and a change in supply.
435)
State the law of demand and illustrate it. Explain what is meant by the term “price” in the law of demand.
436)
Explain how a market demand curve is constructed.
437)
“A shortage is the same thing as scarcity.” Do you agree or disagree with this statement? Why? What can cause a
shortage to disappear in a market? What can cause scarcity to disappear?
438)
Distinguish between a change in demand and a change in quantity demanded.
439)
How is the market supply curve found? In what ways is the process similar to the way the market demand
curve is determined? In what ways are they different?
440)
State the law of supply and explain it.
441)
Given a market equilibrium point, explain, using the concepts of demand and supply, how it is achieved.
442)
In 1950, a phone call at a pay phone cost 5 cents and a first–class stamp cost 3 cents. Today, those prices are 50
cents and 49 cents respectively. What has happened to the price of each good relative to the other? What has
happened to the price of each good relative to all other goods?
443)
How is the equilibrium price determined? What happens if the price is above the equilibrium price? What
happens if the price is below the equilibrium price?
444)
Explain why there is a direct relationship between price and quantity supplied.
445)
What is the difference between a normal good and an inferior good? How does this relate to the demand curve?
446)
Briefly discuss the determinants of supply other than price.
447)
What information is provided by a demand curve? What variables are measured along the axes of the graph?
448)
Briefly discuss the determinants of demand other than price.
Answer Key
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