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Chapter 3 Demand and Supply 229
47) Two goods are substitutes when
A) an increase in the price of one reduces the demand for the other.
B) an increase in the price of one raises the demand for the other.
C) the two goods are used together.
D) the two goods have the same price.
48) An increase in the price of corn will lead to
A) an upward (and leftward) movement along the demand curve for corn.
B) a leftward shift in the demand curve for corn.
C) a rightward shift in the supply curve for corn.
D) an increase in the quantity of corn consumed.
49) A significant increase in the price of tennis balls will most likely lead to
A) an increase in the demand for tennis racquets.
B) an inward shift in the demand for tennis balls.
C) a movement along the demand curve for tennis racquets.
D) an inward shift in the demand for tennis racquets.
50) If the price of butter increases, the demand for margarine
A) will be unchanged. B) will shift outward.
C) will shift inward. D) will kink into an S curve.
51) When the price of a complement (cream) decreases, the demand for the related good (coffee)
A) will fall. B) remains constant.
C) will shift outward. D) will shift inward.
52) An expected future increase in the price of gasoline may
A) increase the demand for gasoline now. B) decrease the demand for gasoline now.
C) increase the supply of gasoline now. D) make gasoline an inferior good.
53) An expected increase in the future price of automobiles will lead to
A) an outward shift in demand for automobiles today.
B) a reduction in the demand for gasoline today.
C) a movement down the demand schedule for automobiles.
D) no predictable impact on today s demand for automobiles.
54) If consumers expect that the price of pretzels will decrease next week, what would happen
today?
A) Demand today for pretzels would decrease.
B) Demand today for pretzels would increase.
C) Demand today for pretzels would be unaffected.
D) Supply today of pretzels would decrease.
55) Which of the following will cause a movement along the demand curve for shoes?
A) An increase in the price of socks B) An increase in income
C) An increase in the price of shoes D) All of the above
56) Which of the following will NOT cause a shift in the demand for rewriteable DVDs?
A) A change in taste
B) A change in income
C) A change in the price of rewriteable DVDs
D) A change in the price of rewriteable CDs
57) With reference to the difference between a change in demand and a change in quantity
demanded, which of the following is true?
A) If a good s price goes down, then demand for the good will decrease.
B) If a good s price goes down, then quantity demanded will increase.
C) If demand increases, then the demand curve will shift to the left.
D) If price rises and quantity demanded decreases, then the demand curve will shift to the
left.
58) Which of the following does NOT cause a shift in demand?
A) Change in income B) Change in tastes
C) Change in the price of the good D) Change in the price of a related good
59) More cattle are found to have mad cow disease. As a result, consumer confidence in the safety
of beef is shaken. What would an economist predict will happen in the beef market?
A) As consumer preferences move away from beef, there is an upward movement along the
beef demand curve.
B) The demand curve will shift to the left.
C) The demand curve does not shift but consumers move to a point lower down the curve.
D) Absolutely no change in either the quantity demand or the demand for beef.
60) Suppose that a new study finds that eating more peanut butter will improve a person s health.
As a result,
A) the demand for peanut butter will fall.
B) the demand for peanut butter will rise.
C) the price of peanut butter will fall.
D) a smaller amount of peanut butter will be purchased.
61) An increase in the number of consumers in a market would cause
A) an increase in quantity demanded. B) an increase in quantity supplied.
C) an increase in demand. D) an increase in supply.
62) A shift in demand occurs when
A) the price of that good changes.
B) the amount demanded of a good changes at each existing price.
C) there is a change in quantity demanded.
D) the price changes and the good is a normal good.
63) If a bottled soft drink and bottled juice are substitutes, when the price of the bottled soft drink
rises,
A) demand for bottled juice rises.
B) demand for bottled juice falls.
C) quantity of bottled juice demanded falls.
D) quantity of bottled juice demanded rises.
64) When income falls,
A) the demand for a normal goods rises.
B) the demand for an inferior goods rises.
C) there is a movement downward along the demand curve for a normal good.
D) there is a movement downward along the demand curve for an inferior good.
65) When income rises,
A) demand for a normal good rises.
B) demand for a normal good falls.
C) demand for an inferior good rises.
D) quantity of a normal good demanded rises.
66) Which of the following factors will lead to a shift in the demand curve?
A) Changes in the costs of inputs
B) Changes in technology
C) Changes in the price of the good
D) Changes in consumers tastes and preferences
67) The relationship between a change in the price of a complementary good and demand for
another complementary good is
A) positive. B) negative. C) inconclusive. D) zero.
68) Assuming coffee and cola are substitutes, if the price of coffee rises,
A) there is a movement along the demand curve for cola.
B) the demand curve for coffee will shift to the right.
C) the demand curve for cola will shift to the right.
D) the demand curve for coffee will shift to the left.
69) Suppose that today, consumers expect the price of a gallon of gasoline to double in the future.
Then today the gasoline
A) demand curve will shift to the right. B) demand curve will shift to the left.
C) supply curve will shift to the right. D) supply curve will shift to the left.
70) A shift in the demand curve will occur when
A) supply shifts.
B) the price of an input used to produce the good changes.
C) consumers income changes.
D) the price of the product changes.
71) Suppose it is discovered that consumption of butter leads to a longer life. This information
would lead to
A) an increase in quantity demanded. B) an increase in demand.
C) a decrease in quantity demanded. D) a decrease in demand.
72) Which of the following causes a decrease in demand for a normal good?
A) Increase in price of a substitute B) Increase in price of a complement
C) Increase in price D) Increase in income
73) Which of the following causes an increase in demand for a normal good?
A) Increase in the price of a substitute B) Increase in the price of a complement
C) Decrease in price D) Decrease in income
74) Refer to the above figure. The rightward shift of the curve indicates
A) an increase in demand. B) a decrease in demand.
C) an increase in quantity demanded. D) a decrease in quantity demanded.
75) Refer to the above figure. For a normal good, the rightward shift of the curve could have been
caused by
A) a technological improvement. B) an increase in the cost of inputs.
C) an increase in income. D) a decrease in income.
76) Refer to the above figure. The arrows show the direction of a shift in the demand curve of Good
A. Which of the following would be the most likely reason for the shift in the demand curve if
Good A is an inferior good?
A) An increase in the price of Good A B) A decrease in the price of Good A
C) A decrease in consumers income D) An increase in consumers income
77) Refer to the above figure for a particular good. The rightward shift of the curve could have been
caused by
A) a decrease in the price of an input.
B) a decrease in the price of that good.
C) an increase in the price of a complementary good.
D) an increase in the price of a substitute good.
78) A shift of the demand curve to the left represents
A) an increase in demand. B) a decrease in demand.
C) an increase in quantity demanded. D) a decrease in quantity demanded.
79) Which of the following will NOT lead to a decrease in demand for a normal good?
A) An increase in income
B) An increase in the price of an input
C) A decrease in the price of a complement good
D) An increase in the number of consumers
80) A shift in the demand curve to the right represents
A) an increase in demand. B) a decrease in demand.
C) an increase in quantity demanded. D) a decrease in quantity demanded.
81) An increase in demand occurs when
A) we measure price in money price rather than real price.
B) we move up the demand curve.
C) the demand curve shifts to the right.
D) the demand curve shifts to the left.
82) A decrease in demand would be represented by
A) the price of a good going from $3 to $4.
B) an increase in the cost of resources used to produce the good.
C) a movement along the demand curve.
D) a shift of the demand curve to the left.
83) A normal good is one for which
A) demand increases as income increases.
B) demand increases as income decreases.
C) the demand curve is horizontal.
D) demand increases as the price of a substitute increases.
84) As John s income has increased, he has purchased fewer hamburgers. Hamburgers are
A) a normal good for John.
B) an inferior good for John.
C) not following the law of demand.
D) leading to a rightward shift in John s demand curve for hamburgers.
85) Refer to the above figure. A movement from point A to point B indicates
A) an increase in demand. B) a decrease in demand.
C) an increase in quantity demanded. D) a decrease in quantity demanded.
86) Refer to the above figure. A movement from Point A to Point B is caused by
A) an increase in income.
B) an expectation of a decrease in the price of the good in that figure.
C) a decrease in the price of the good in that figure.
D) all of the above.
87) Refer to the above figure. Which of the following statements is true?
A) Panel A shows a decrease in demand and Panel B shows an increase in demand.
B) Both Panels A and B show an increase in demand.
C) Panel A shows a change in demand and Panel B shows a change in quantity demanded.
D) Panel A shows a change in quantity demanded and Panel B shows a change in demand.
88) 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?
A) Panel A. B) Panel B. C) Both panels. D) Neither panel.
89) A change in quantity demanded
A) is a shift of the demand curve.
B) is a movement along the demand curve.
C) can be either a shift or a movement along the demand curve.
D) is caused when there is a change in a ceteris paribus factor.
90) A change in any of the ceteris paribus conditions for demand leads to a
A) a good going from an inferior good to a normal good.
B) movement along the demand curve.
C) shift of the demand curve.
D) change in supply.
91) Morgan graduates from college and gets a job paying $50,000 a year. While in school, she
consumed 4 pounds of chicken and 1 pound of shrimp a month. After she starts work, she
consumes 2 pounds of chicken and 3 pounds of shrimp a month. If everything else is held
constant, we know that
A) chicken and shrimp are normal goods for Morgan.
B) chicken is an inferior good and shrimp is a normal good for Morgan.
C) chicken is an inferior good for Morgan.
D) shrimp is a normal good for Morgan.
92) After the price of milk increases, David buys more eggs and less cereal. For David,
A) milk, eggs, and cereal are all complements.
B) milk and eggs are complements, and milk and cereal are substitutes.
C) milk and eggs are substitutes, and milk and cereal are complements.
D) milk, eggs, and cereal are all substitutes.
93) When a rise in the price of one item results in a decrease in the demand for another good, then
the two goods are
A) substitute goods. B) complementary goods.
C) inferior goods. D) satisfying the law of supply.
94) A decrease in quantity demanded of a good is caused by
A) a decrease in income. B) a decrease in the price of a substitute.
C) an increase in the price of the good. D) a change of tastes.
95) Kariuki decreases his consumption of grapes after his income goes up. For Kariuki
A) grapes and income are substitute goods.
B) grapes and income are complementary goods.
C) grapes are an inferior good.
D) grapes are a superior good.
96) Mary increases her consumption of Good X after the price of Good Y decreased. For Mary
A) Good X and Good Y are substitutes. B) Good X and Good Y are complements.
C) Good X is an inferior good. D) Good Y is an inferior good.
97) Mary decreases her consumption of Good X after the price of Good Y decreased. For Mary
A) Good X and Good Y are substitutes. B) Good X and Good Y are complements.
C) Good X is an inferior good. D) Good Y is an inferior good.
98)
J
ohn increases his consumption of Good X and Good Y when his income increases. For John
A) Good X and Good Y are substitute goods.
B) Good X and Good Y are complement goods.
C) Good X is an inferior good.
D) Good X and Y are normal goods
99) All of the following are non price determinants of demand EXCEPT
A) price of related goods.
B) price of raw materials used in production of the good.
C) income.
D) number of consumers.
100) Assuming that turkey, chicken, pork, and beef are substitutes, suppose that the price of turkey
has fallen. This will, other things being equal
A) reduce demand for chicken, pork, and beef.
B) leave demand for chicken, pork, and beef unchanged.
C) increase demand for chicken, pork, and beef.
D) increase quantity demanded of beef.
101) Which factor would cause a movement along the demand curve for pizza?
A) an increase in the number of students in town
B) a renewed preference for Italian food
C) a drop in the price of pizza
D) an increase in average income
102) Which of the following will cause the demand curve for cable TV services to shift to the left?
A) a rise in the price of cable TV services
B) a decrease in average incomes of cable TV subscribers
C) an increase in population
D) the creation of several hit TV series
103) Which of the following will cause the demand curve for beer to shift right?
A) a fall in the price of beer
B) a fall in average incomes of beer consumers
C) a decline in population
D) a successful advertising campaign linking beer consumption to lower cholesterol
104) Which of the following products are likely to be complementary goods?
A) Coke and Pepsi B) portable MP3 players and batteries
C) HD DVDs and Blu Ray DVDs D) Domino s pizza and Papa John s pizza
105) If a decrease in the price of good A causes a decrease in demand for good B, the two goods are
A) substitutes. B) complements. C) normal. D) inferior.
106) Which one of the following would cause a rightward shift in the demand curve of digital
cameras?
A) Digital cameras become easier to use.
B) The price of digital cameras decreases.
C) Production methods are modified to make production of digital cameras more efficient.
D) Government regulations are imposed to limit the number of digital cameras imported.
107) The Chunnel auto tunnel allows motorists to travel between England and France. As an
alternative, there is ferry service across the English Channel. What would happen in the market
for ferry service if fees for using the Chunnel were increased?
A) The demand for ferry service would increase.
B) The demand for ferry service would decrease.
C) There would be an upward movement along the demand curve for transits through the
Chunnel.
D) There would be a downward movement along the demand curve for transits through the
Chunnel.
108) Which one of the following would cause an increase in the demand for hotel rooms in Hawaii?
A) an increase in airfares to Hawaii
B) a decrease in airfares to Hawaii
C) an upward movement along the demand curve for stays in Hawaiian hotel rooms.
D) a downward movement along the demand curve for stays in Hawaiian hotel rooms.
109) What would happen in the market for prescription drugs if people begin to view
over the counter remedies as a good substitute for prescription medications?
A) Prescription medications will become an inferior good.
B) There is an upward movement along the demand curve for prescription medications.
C) There is a downward movement along the demand curve for prescription medications.
D) The demand for prescription medications will decrease.
110) Which of the following is a non price determinant of demand?
A) income B) tastes and preferences
C) prices of related goods and services D) All of the above are correct.
111) Which of the following is NOT a non price determinant of demand?
A) the price of the good or service B) tastes and preferences
C) expectations of future prices D) prices of related goods and services
112) Which of the following would cause a change in the quantity demanded of a product?
A) a higher price B) a higher income
C) expectations of future price increases D) All of the above are correct.
113) Which of the following would most likely be considered complements?
A)
b
utter and margarine B) rental cars and taxis
C) plastic wrap and aluminum foil D) tennis rackets and tennis balls
114) If a good is a normal good, an increase in income will
A) decrease the quantity demanded of the good.
B) increase the demand for the good.
C) cause the demand curve for the good to shift to the left.
D) cause a movement down along the demand curve.
115) All of the following cause a shift in the demand curve EXCEPT a change in the
A) price of related goods. B) price of the good or service.
C) consumer income. D) number of consumers.
116) If the price of one good goes up and the demand of a related good goes down, the two goods
are
A) complements. B) substitutes. C) inferior goods. D) normal goods.
117) When income increases, the demand curve for an inferior good
A) shifts to the right.
B) shifts to the left.
C) moves up along the demand curve for the product.
D) remains constant.
118) We know that products G and H are related goods, because when the price of G increases,
A) the demand curve for H will shift to the right, because G and H are complementary goods.
B) the quantity of H demanded will shift along its demand curve, because G and H are
complementary goods.
C) the demand curve for H will shift to the left, because G and H are complementary goods.
D) the demand curve for H will remain unchanged because G and H are substitute goods.
119) An increase in the quantity demanded is shown by
A) a leftward shift of the demand curve.
B) a rightward shift of the demand curve.
C) a movement down along a demand curve.
D) a movement up along a demand curve.
120) A movement along a demand curve is
A) a change in demand and can be caused by a change in consumers income.
B) a change in the quantity demanded and is caused by a change in the price of the good.
C) a change in the quantity demanded and can be caused by a change in consumers income.
D) a change in demand and is caused by a change in the price of the good.
121) Which of the following are complementary goods?
A) sport utility vehicles and gasoline B)
b
utter and margarine
C)
b
eer and wine D) DVDs and videocassettes
122) Which of the following are substitute goods?
A) margarine and butter B) peanut butter and jelly
C) pizza and beer D) sports utility vehicles and gasoline
123) Refer to the above figure. Suppose that Cheerios and Apple Jacks are substitutes. Which
diagram shows the effect on the demand for Cheerios when the price of Apple Jacks cereal has
increased?
A) A B) B C) neither graph D)
b
oth graphs
124) Refer to the above figure. Suppose that Cheerios and Apple Jacks are substitutes. Which
diagram shows the effect on the demand for Cheerios when the price of Apple Jacks cereal has
decreased?
A) A B) B C) neither graph D)
b
oth graphs
125) Refer to the above figure for the market of Cheerios. Which diagram depicts the effect of an
increase in the price of Cheerios?
A) A B) B C) neither graph D)
b
oth graphs
126) If the price of margarine falls, the demand for butter will
A) remain unchanged. B) increase.
C) decrease. D) rise at first and then fall.
127) If the price of gasoline rises sharply and the demand for sports utility vehicles falls, then the two
goods are
A) complements. B) normal goods. C) substitutes. D) inferior goods.
128) If the price of airline travel in Europe falls and the demand for train travel in Europe also falls,
then the two goods are
A) complements. B) normal goods. C) substitutes. D) inferior goods.
129) Distinguish between a change in demand and a change in quantity demanded.
130) Briefly discuss the determinants of demand other than price.
