The Economic Way of Thinking, 13e (Heyne)
Chapter 3 Substitutes Everywhere: The Concept of Demand
1) The textbook cautions against speaking of “the people” as wanting a particular good
A) because it is not clear in what sense groups as distinct from individuals can ever have wants.
B) because people rarely know what they themselves really want.
C) because the wants of the people are relevant only in a democracy.
D) because assertions about “the people” confuse economics with politics.
E) unless the majority has clearly voted for it.
2) Economists find the notion of people “needing” things to be
A) supported by the law of demand.
B) considered false.
C) seriously misleading because they ignore substitutes.
D) considered tentatively true until the preponderance of the data suggests otherwise.
3) Suppose the average person needs 8 glasses of water each day to maintain optimal health.
What would an economist conclude?
A) The average person will therefore drink 8 glasses each day.
B) The average person will therefore drink more than 8 glasses each day, just to play it safe.
C) There are no substitutes for water.
D) The amount the average person drinks will depend upon the opportunity cost of acquiring
water.
4) Nobody needs soda. So why do people drink it?
A) They deny the data and believe they really do need soda.
B) The expected additional benefits of another soda outweigh the additional costs.
C) There are no substitutes for soda.
D) Soda is a good for the people who consume it, and therefore they will drink it at any price.
5) Chuck Stake never eats vegetables, although he can afford to buy them. According to the
economic way of thinking, Chuck
A) must have a serious physiological aversion to vegetables.
B) was probably forced to eat them as a kid, and now hates them.
C) believes the additional benefits from eating vegetables are outweighed by the additional costs.
D) has studied economics enough to know that nobody needs to eat their vegetables.
6) Fill in the blanks: Other things constant, ________ people will seek medical care when the
price of a doctor’s visit ________.
A) fewer; falls
B) more; falls
C) more; rises
D) no; rises.
7) A universal health insurance program, which lowers patient’s out-of-pocket expenses, would
tend to
A) reduce the number of patients seeking medical care.
B) reduce the number of doctors offering medical care.
C) increase the non-monetary costs of medical care, such as waiting longer in line.
D) generate all of the above.
8) The textbook authors claim
A) diabetics don’t need insulin.
B) diabetics don’t want insulin.
C) diabetics face no substitutes for insulin.
D) diabetics can’t find insulin at a fair price.
E) none of the above.
9) Use the economic way of thinking to answer the following question: Does a diabetic need
insulin?
A) No
B) Yes, and therefore diabetics will always buy all what they need.
C) Probably, but diabetics often find substitutes for insulin in the real world.
D) Probably, but diabetics only care about the expected cost of insulin and ignore the expected
benefits.
10) Your text suggests if the price of insulin were to significantly increase, more diabetics will
A) avoid refilling their prescriptions.
B) turn toward substitutes such as a better diet and exercise.
C) adopt holistic healthcare, organic medicines, and other perceived substitutes.
D) do all of the above.
E) do none of the above.
11) Suppose you hear Professor I.M. Dismal say, “There is no substitute for carefully reading
your textbook!” In the real world, students
A) will always and absolutely obey their professor’s orders.
B) will purchase the textbook regardless of its price.
C) will often find what they believe are useful substitutes for reading the text.
D) will have a vertical demand curve for textbooks.
12) The statement that “water is a necessity” is misleading because
A) it does not distinguish fresh water from salt water.
B) it fails to specify for whom water is a necessity.
C) it incorrectly assumes people use water only or primarily for drinking.
D) water is a necessity only in desert environments.
E) water is extremely abundant.
13) Which of the following statements is true?
A) If higher water prices encourage a landlord to place bricks in the water tanks of his toilets to
reduce water usage, then for him bricks are substitutes for water.
B) If higher gasoline prices encourage a potential vacationer to stay at home and read a good
book by the fire, rather than drive through the country, then for her firewood is a substitute for
gasoline.
C) Both A and B are true.
D) None of the above are true.
14) Fact: People use water for many different purposes, from drinking and cleaning to filling
pools, balloons, and squirt guns. Economists acknowledge the multiple uses of water when they
point out that
A) everybody needs water.
B) water is a good with many alternative uses at the margin.
C) the demand for water is completely inelastic—consumers are totally insensitive to changes in
the price of water.
D) nothing but water can be used to serve all the purposes water serves.
15) Suppose somebody made the following statement: “There will never be a substitute for
Howard Stern, the radio shock-jock.” According to the economic way of thinking, the above
statement
A) is essentially true.
B) is misleading because cloning already exists and it is a matter of time before people will be
cloned.
C) is incorrect because many people choose to listen to other programs as the perceived costs of
listening to Howard Stern change.
D) is essentially false because Howard Stern provides nothing of value to society.
16) Doctor Hugh R. Sick recommends his patient take 2 units of insulin per day to successfully
manage her diabetes condition. In a different office across town, Doctor I. M. Dismal, an
economics professor, tells his student to read every assigned textbook chapter to successfully
pass economics. In spite of the sage advice of the doctor and professor, the economic way of
thinking recognizes
A) patients don’t always follow their doctor’s orders.
B) students don’t always follow their professor’s pleas.
C) substitutes for prescriptions and textbook assignments exist; patients and students
demonstrate their desire for substitutes through their actions.
D) all of the above are true.
17) Consider a tragic and heart-wrenching case in which a cancer patient is told he needs
chemotherapy in order to live three more years at best, but the patient’s final three years will be
filled with all the terrible side-effects of the treatment. Without it, he will surely die within a
year, but his quality of life would be a better. Suppose he chooses to quit chemotherapy. The
economic way of thinking would therefore conclude
A) the patient made the wrong choice.
B) the doctors were absolutely right—the patient needs chemotherapy.
C) it is better to live longer than it is to die sooner.
D) all of the above are true.
E) none of the above is true.
18) A cancer patient is told he needs chemotherapy in order to live three more years at best, but
the patient’s final three years will be filled with all the terrible side-effects of the treatment.
Without it, he will surely die within a year, but his quality of life would be a better. Suppose he
chooses to quit chemotherapy and instead he spends his time learning to play the cello,
something he always wanted to learn. The economic way of thinking suggests
A) others should consider playing the cello while they are still young and healthy.
B) the doctors were absolutely right—the patient needs chemotherapy.
C) the patient considers playing the cello a substitute for chemotherapy.
D) the patient has clearly given up his will to live.
19) Suppose a cancer patient decides to forsake weekly chemotherapy treatments in order to
spend more meaningful, loving time with her friends and family. In cases where patients refuse
treatment,
A) there are indeed substitute for chemotherapy, such as time with family.
B) the patient is behaving irrationally.
C) the patient doesn’t know what is in her long-run best interest.
D) the patient fails to see that chemotherapy is a better substitute than time with the family.
20) Many middle-to-older-aged men now claim they “need” Viagra (the male impotency wonder
drug) for an enjoyable sex life. The economic way of thinking predicts
A) more men would be likely to claim they need Viagra if the price per pill were much lower
(say two cents each) compared to the current price.
B) fewer men would be likely to claim they need Viagra if the price per pill were much higher
(say, two hundred dollars each) compared to the current price.
C) other things constant, more prescriptions would be written if the price of Viagra falls
significantly.
D) other things constant, fewer prescriptions would be written if the price of Viagra rises
significantly.
E) all of the above are true.
21) Which of the following sets of goods might, under the right circumstances, be substitutes for
an automobile?
A) Buses, trains, planes
B) Powerboats, blimps, motorcycles
C) Motels, tents, cardboard boxes
D) Designer suits, fine wines, fancy homes
E) All of the above.
22) Which of the following goods might, under the right circumstances, be substitutes for love?
A) Power
B) Wealth
C) Notoriety
D) All of the above.
E) Trick question: there are no substitutes for love.
23) Which of the following sets of goods might, under the right circumstances, be substitutes for
water?
A) Milk and juice
B) Beer and wine
C) Stones and bricks
D) A, B, and C above are all potential substitutes for water.
E) A and B above are potential substitutes for water, but C (stones and bricks) can never be
substitutes for water in the real world.
24) According to physicians, people should drink eight full glasses of water per day to maintain
optimal health; it is now common knowledge. But people don’t necessarily follow doctor’s orders
because
A) only they know what they need.
B) people value other goods in addition to optimal health.
C) we only really need a few ounces of water each day.
D) nobody considers optimal health to be desirable.
25) Suppose attendance is required for a passing grade at Ultimatum University, and the
professor repeatedly reminds students of the need to attend every day to survive the class.
Nevertheless, we observe many students choosing to stop attending. The students who stop
attending include some who even enjoy the class. Using the economic way of thinking, the
choice to stop attending generally occurs because
A) the students secretly despise the professor.
B) the professor secretly despises the students.
C) the students value other goods in addition to passing the class.
D) the students feel the university has no right to impose such restrictions on their personal
freedom.
26) It may be misleading to call water a necessity because
A) the amount of water a community consumes does not vary with the price people must pay for
water.
B) the demand for water does not obey the law of demand.
C) the demand for water is highly elastic.
D) the demand for water is highly inelastic.
E) there are many uses of water for which good substitutes exist.
27) According to the “law of demand”
A) demand generates a supply sufficient to satisfy the demand.
B) nothing will be produced unless there is a demand for it.
C) people will purchase less of a good when its price rises.
D) wants are indefinitely expansible and can never be fully satisfied.
E) whatever people want will eventually be supplied.
28) The “law of demand” means that the demand for any scarce good
A) is completely elastic.
B) cannot be completely inelastic.
C) must be inelastic.
D) is only a short-run demand.
E) cannot be elastic.
29) According to the law of demand,
A) everything has its price.
B) human wants are insatiable.
C) people will do anything to obtain goods they want.
D) there are no free goods.
E) there is a negative relationship between the amount of anything people will purchase and the
sacrifice that must make to obtain it.
30) U.S. households use about 75 gallons of water per capita per day on the average because
A) the price they must pay for water is low.
B) there is so much fresh water in the U.S.
C) they use water in irrational ways.
D) water is a basic necessity of life.
E) water is a basic right.
31) There are many excellent substitutes for water in almost all American cities because
A) the demand for water is elastic.
B) the demand for water is inelastic.
C) the supply of water is limited.
D) there are so many alternative drinks readily available in the marketplace.
E) water is cheap, and people therefore use it for many different purposes.
32) Are there many good substitutes for water?
A) No, because living creatures die without water.
B) No, even though there are many substitute ways to obtain water.
C) Yes, because water is recycled by nature.
D) Yes, because water is used for so many different and trivial purposes.
E) Yes, because water may be found in many forms other than its pure form.
33) People use water for trivial, unimportant purposes because
A) there is little demand for water.
B) its relative price is very low.
C) they don’t realize how essential water is to life.
D) they don’t realize the world’s supply of water is limited.
E) they underestimate the total demand for water.
34) Since few Americans would ever be willing to pay more for a sandwich than for a pair of
jeans,
A) for most Americans clothing is more important than food.
B) for most Americans clothing is more valuable than food.
C) for most Americans clothing has more monetary value than food.
D) most Americans derive their values from the culture rather than biological necessities.
E) most Americans have little difficulty obtaining enough to eat.
35) Grocery shoppers who willingly pay high prices at one supermarket to avoid long lines at the
check-out counter of another supermarket with lower prices demonstrate, through their actions,
A) they are not rational shoppers.
B) they don’t care about money.
C) they would pay any amount of money to save a little time.
D) all of the above.
E) none of the above.
36) Intelligent policymaking requires making trade offs, which means
A) accepting unethical but unavoidable compromises.
B) giving up what is less valuable for what is more valuable.
C) putting one’s own interests ahead of the interests of others.
D) sacrificing some people’s welfare to other people’s welfare.
E) violating someone’s rights.
37) The concept of demand as used in economic theory expresses the relationship between the
quantity of a good people will want to purchase and
A) the price of complementary goods.
B) the price of that good.
C) the supply of substitute goods.
D) the supply of that good.
E) their welfare overall.
38) A movement from one point of a demand curve to another is properly called a change in
A) demand.
B) quantity demanded.
C) tastes and preferences.
D) the availability of substitutes.
39) Fill in the blanks: Other things constant, a ________ in price will ________ the ________
for a good.
A) decrease; decrease; demand
B) decrease; increase; demand
C) decrease; increase; quantity demanded
D) decrease; decrease; quantity demanded
40) Fill in the blanks: Other things constant, a ________ price ________ quantity demanded.
A) higher; increases
B) lower; increases
C) higher; decreases
D) lower; decreases
E) both B and C above.
41) The quantity demanded of a good reflects
A) the number of units of a good people actually purchase.
B) the number of units of a good suppliers will provide.
C) the number of units of a good people plan to purchase at different prices.
D) the number of units of a good people need to purchase.
42) All of the following factors are held constant when price changes on a demand curve except:
A) income.
B) quantity demanded.
C) population.
D) tastes and preferences.
43) If quantity demanded increases at all possible prices, demand has
A) increased.
B) decreased
C) remained the same; only quantity demanded has changed.
D) remained the same; however, the curve has become more steep.
44) When the price of a good decreases,
A) demand increases.
B) quantity demanded increases.
C) demand decreases.
D) quantity demanded decreases.
45) A movement along a demand curve is most likely to be caused by
A) a change in the population.
B) a change in expectations.
C) a change in income.
D) a change in the price of a good.
46) Suppose the demand curve for committing robbery can be represented by a downward
sloping demand curve. In other words, as the price of committing a robbery falls, more robberies
will be committed. Now, suppose laws are passed allowing people to carry guns unconcealed in
public. Which of the following best explains the likely outcome?
A) Demand for robberies will fall.
B) Supply of robberies will increase.
C) The elasticity of robberies will be perfectly inelastic.
D) The quantity demanded of robberies will decrease because the price of robberies has risen.
47) Which of the following is least likely to increase the demand for airline tickets?
A) A Department of Energy order closing gasoline stations on weekends.
B) A Department of Energy order restricting gasoline sales on odd and even-numbered days of
the month to cars with odd or even final digits in the license number
C) A fall in the price of airline tickets
D) A rise in the price of gasoline
E) An excellent record of airline safety
48) Which of the following will not change the demand for movie tickets?
A) A change in the cost of babysitting services
B) A change in the incomes of moviegoers
C) A change in the price of movie tickets
D) A change in the quality of television programs
E) A change in the quality of movies
49) Which consequence is least likely to follow from an increase in the price of gasoline?
A) Decreased demand for automobile tires
B) Decreased demand for gasoline
C) Increased demand for airline tickets
D) Increased demand for fuel-efficient cars
E) Increased demand for public transportation
50) Suppose your college sharply raises tuition rates next year. Other things constant, what is the
least likely to occur?
A) The overall demand for courses at your college will fall.
B) Your college bookstore will sell fewer textbooks.
C) It will be easier to find parking at your college.
D) Fewer students will use your college library.
51) Suppose the price of water rose sharply. Other things constant, what is the least likely to
occur?
A) People will consume less water.
B) Fewer swimming pools will be filled with water.
C) More high-pressure showerheads will be sold.
D) The demand for water will fall.
52) Suppose the price of coffee falls. Other things constant, what will not happen?
A) People will consume more coffee.
B) People will consume more cream.
C) The demand for coffee will rise.
D) The demand for cream will fall.
E) More people will now consider drinking bottled water.
53) Suppose the price of skateboards were to fall. Other things constant, what is the least likely
to occur?
A) More skateboards will be purchased.
B) The demand for skateboards will increase.
C) More helmets will be purchased.
D) The demand for helmets will increase.
54) Which of the following would be most likely to cause an increase in the demand for gold?
A) A decrease in the price of gold
B) The expectation of a future decrease in the price of gold
C) An increase in the price of gold
D) The expectation of a future increase in the price of gold
E) An increase in the supply of gold
55) Which of the following would tend to increase the demand for college textbooks?
A) A lower price of college textbooks
B) An increase in the number of enrolled college students
C) A significant increase in college tuition
D) Both A and B
56) Suppose the price of home heating oil is unchanged, yet we observe people purchasing 20%
more than a year ago. Then
A) the demand for home heating oil has increased.
B) the demand for home heating oil has decreased.
C) the demand for home heating oil has remained unchanged—only quantity demanded changed.
D) the law of demand has been proven false.
57) What would not lead to an overall decrease in demand for air travel in the U.S.?
A) The fear of future terrorist attacks
B) News of lengthy security delays at airports
C) An expected decrease in airfares
D) A substantial increase in bus and passenger train fares
58) Redbox rents DVDs. Other things constant, which of the following would likely increase the
demand for their DVDs?
A) A rise in the cost of going to the movies
B) A fall in the price of DVD players
C) A fall in the price of Redbox DVD movie rentals
D) Both A and B
59) Suppose hamburgers and hotdogs are substitute goods. Other things constant, a rise in the
price of hotdogs would tend to
A) decrease the demand for hotdogs.
B) decrease the demand for hamburgers.
C) increase the demand for hotdogs.
D) increase the demand for hamburgers.
E) do any of the above, because nobody needs hotdogs or hamburgers.
60) Suppose the pizza at Pizza House and Little Weezer’s are fairly close substitutes. If Pizza
House raises their price 20%, and Little Weezer’s keeps their price unchanged, which is most
likely to occur?
A) The demand for Little Weezer’s pizza will increase
B) The demand for Pizza House pizza will decrease
C) Both A and B
D) None of the above
61) Macintosh and IBM computers are considered substitute goods. Other things constant, if
IBM lowered its price, compared to the Mac, then
A) the demand for IBM computers would increase.
B) the demand for Mac computers would increase.
C) the quantity demanded for IBM computers would increase.
D) all of the above would occur.
62) Skis and snowboards are close substitute goods. Fill in the blanks: A ________ in the price
of snowboards would tend to ________ the demand for ________.
A) rise; increase; snowboards
B) rise; decrease; snowboards
C) rise; decrease; skis
D) rise; increase; skis
E) fall; increase; snowboards
63) Suppose consumers view the George Foreman Grill and the Weber charcoal grill as close
substitutes. Other things constant, a fall in the price of the George Foreman Grill would tend to
A) increase the demand for the Weber grill.
B) increase the demand for the George Foreman Grill.
C) decrease the demand for the Weber grill.
D) decrease the demand for the George Foreman Grill.
64) Complementary goods are goods people consume together, such as peanut butter and jelly. If
the price of peanut butter falls, we predict
A) the demand for peanut butter would increase.
B) the demand for jelly would increase.
C) the demand for peanut butter would decrease.
D) the demand for jelly would decrease.
65) Suppose milk and chocolate syrup are complements (mixed together they make chocolate
milk). If the price of milk increased by exactly 25%, the economic way of thinking suggests
A) the demand for milk would decrease.
B) the demand for chocolate syrup would decrease.
C) the demand for milk would decrease by exactly 25%.
D) the demand for chocolate syrup would decrease by exactly 25%.
66) Paint and paintbrushes are complements. If the price of paint increases, then
A) the demand for paintbrushes will increase.
B) the demand for paintbrushes will decrease.
C) the demand for paint will increase.
D) the demand for paint will decrease.
67) Suppose most consumers who eat hotdogs also use mustard, a complementary good. If the
price of hotdogs rises, which is most likely to happen?
A) The demand curve for mustard will shift right.
B) The demand curve for hotdogs will shift right.
C) The demand curve for mustard will shift left.
D) The demand for hotdogs will fall.
68) Consider baseball games and ballpark hotdogs. A significant increase in the price of baseball
game tickets would tend to
A) increase the demand for ballpark hotdogs.
B) decrease the demand for baseball game tickets.
C) decrease the demand for ballpark hotdogs.
D) increase the demand for baseball game tickets.
69) Goods, such as L.A. Lakers tickets and parking spaces around the stadium, are sometimes
consumed together. Which of the following would decrease the demand for parking spaces
around the stadium?
A) An increase in the price of Lakers tickets
B) A higher parking fee
C) A decrease in the price of Lakers tickets
D) A substantial increase in the price of local cab services
70) A “normal good” is defined as any good in which
A) a rise in its price will reduce quantity demanded.
B) a fall in its price will increase quantity demanded.
C) a rise in income will reduce overall demand.
D) a fall in income will reduce overall demand.
71) A “normal good” is defined as any good in which
A) a rise in its price will reduce quantity demanded.
B) a fall in its price will increase quantity demanded.
C) a rise in income will increase overall demand.
D) a fall in income will increase overall demand.
72) Something is a normal good if
A) the demand for it decreases when its price rises.
B) the demand for it decreases when its price falls.
C) the demand for it increases when income rises.
D) the demand for it increases when income falls.
73) Pick the true statement below:
A) All scarce goods are normal goods.
B) All scarce goods are inferior goods.
C) A normal goods is a scarce good.
D) An inferior good is a bad.
74) Suppose Carmen buys ramen noodles. To determine whether ramen noodles are a normal or
inferior good for her, we must observe how Carmen
A) responds to a change in the price of a substitute for ramen noodles.
B) responds to a change in the price of a complement for ramen noodles.
C) responds to a change in the price of ramen noodles itself.
D) responds to a change in her income.
E) responds to all of the above.
75) What’s a normal good to me might be
A) a normal good to you.
B) an inferior good to you.
C) a bad to you.
D) any of the above to you.
76) Fill in the blank: Rebecca goes to the hairdresser more often now that her salary has
increased. For Rebecca, the hairdresser’s service is probably ________.
A) a normal good
B) an inferior good
C) a free good
D) a bad
77) As a result of losing his job, Uncle Roy dropped his cable TV service and instead bought a
new iPod. For Uncle Roy,
A) cable is an inferior good and the iPod is a normal good.
B) cable is a normal good and the iPod is an inferior good.
C) both cable and the iPod are normal goods.
D) both cable and the iPod are inferior goods.
E) cable and the iPod are complementary goods.
78) While you and your roommate are eating your nightly Hamburger Helper meal, your
roommate says “I’ll never eat Hamburger Helper again once I graduate and start making some
real money!” In your roommate’s eyes, Hamburger Helper is currently
A) a normal good.
B) an inferior good.
C) a bad.
D) a waste of his money.
79) For an inferior good, a decrease in demand is caused by
A) a rise in income.
B) a fall in income.
C) a rise in price.
D) a fall in price.
80) For a normal good, a decrease in demand is caused by
A) a rise in income.
B) a fall in income.
C) a rise in price.
D) a fall in price.
81) Economists distinguish a “normal” good from an “inferior” good by focusing on
A) how a change in income effects the demand for that good.
B) the good’s quality.
C) the good’s durability.
D) the good’s desirability.
E) all of the above.
82) Something is an inferior good if
A) the demand for it decreases when its price rises.
B) the demand for it decreases when its price falls.
C) the demand for it increases when income rises.
D) the demand for it increases when income falls.
83) Other things constant, which of the following would tend to increase the demand for Toyota
autos?
A) A fall in the price of Toyotas
B) A fall in the price of Chryslers (a substitute for Toyotas)
C) A rise in income, if Toyotas are a normal good
D) A rise in income, if Toyotas are an inferior good
84) Other things constant, which of the following would tend to increase the demand for Disney
World vacations?
A) A rise in the price of Hawaiian vacations (a substitute for Disney World)
B) A rise in income, if Disney World vacationing is a normal good
C) A fall in the price of air travel (a complementary good)
D) New information that Disney World will raise its prices once the summer season is over
E) All of the above.
85) Other things constant, which of the following would tend to decrease the demand for Disney
World vacations?
A) A rise in the price of Hawaiian vacations (a substitute for Disney World)
B) A rise in income, if Disney World vacationing is a inferior good
C) A fall in the price of air travel (a complementary good)
D) New information that Disney World will raise its prices after this summer
E) All of the above.
86) Think of the interest rate as the “price” of a home loan. Other things constant, if people
expect interest rates to rise significantly over the next couple months, their willingness to
purchase a home financed by a mortgage today will tend to
A) rise.
B) fall.
C) remain unchanged.
D) do any of the above because home purchase decisions are independent of interest rates on
mortgages.
87) Suppose homebuyers believe that prices will fall over the next six months to a year. This
would tend to
A) increase their demand for homes today.
B) decrease their demand for homes six months from today.
C) decrease their demand for homes today.
D) have no effect on their demand today or six months from today.
88) A higher expected price tomorrow will tend to
A) shift today’s demand curve to the left.
B) shift today’s demand curve to the right.
C) have no effect on today’s demand curve.
D) have no effect on tomorrow’s demand curve.
89) You hear that the price of gasoline will fall 20 cents overnight. This will tend to
A) increase your demand today.
B) decrease your demand tomorrow.
C) increase your demand tomorrow.
D) leave your demand unchanged both today and tomorrow, especially if it is highly elastic to
changes in prices.
90) Private and state universities are substitutes. Which of the following would tend to increase
the demand for state universities?
A) A fall in private university tuition
B) An increase in private university tuition
C) An increase in interest rates on student loans (a complementary good)
D) Higher dorm fees at state universities
91) Regular and organic vegetables are substitutes. A rise in the price of organic vegetables,
other things constant, would tend to
A) reduce the demand for regular vegetables.
B) increase the demand for regular vegetables.
C) have no effect on the demand for regular vegetables.
D) have no effect on the quantity demanded of organic vegetables.
92) Other things constant, the demand for an inferior good will decrease (the demand curve will
shift left) if
A) the price of a complementary good decreases.
B) the price of a substitute good increases.
C) income increases.
D) income decreases.
93) “Less demand causes lower prices, and lower prices cause more demand.” The above
statement shows
A) economic theory can be used to prove just about anything.
B) everything depends on everything else.
C) prices fluctuate in a free-market situation.
D) the speaker has confused himself by saying demand in the first half of the statement when he
meant quantity demanded.
E) the speaker has confused himself by saying demand in the second half of the statement when
he meant quantity demanded.
94) Unless demand is changing, price and quantity will
A) be proportionate.
B) move in opposite directions.
C) move in the same direction.
D) fluctuate cyclically.
E) remain constant.
95) Demand relates the amounts of a good purchased to
A) the amounts actually obtained.
B) the gross domestic product.
C) the quantity needed.
D) the sacrifices required to obtain the good.
E) the time required to produce the good.
96) “Coffee Prices Sink As Demand Falls.” The newspaper heading
A) assumes the law of demand does not hold.
B) confuses demand with quantity demanded.
C) misunderstands the role of supply in price formation.
D) reverses the actual relationship between price and demand.
E) uses the concept of demand correctly.
97) A newspaper headline asserts: “Rising demand pulls up copper prices.” The headline
A) is claiming demand determines price (rather than price determining demand).
B) is claiming more copper would be demanded at higher prices.
C) is claiming prices will fluctuate indefinitely.
D) is guilty of all three errors mentioned above.
E) makes perfectly good sense from the standpoint of economic theory.
98) If the price of gasoline rose 50% during a period in which the general price level rose 100%,
economic theory would predict
A) a decline in the quantity of gasoline demanded.
B) an increase in the quantity of gasoline demanded.
C) a decrease in the demand for gasoline.
D) an increase in the supply of gasoline.
E) less driving by motorists.