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Chapter 3 Demand and Supply 209
3) A demand curve
A) slopes down because of the inverse relationship between price and quantity demanded.
B) slopes up because of the direct relationship between price and quantity demanded.
C) can slope up or down depending on the tastes of the consumer.
D) is vertical for necessities, upward sloping for luxury goods, and downward sloping for all
other goods.
4) If
A
pple s iTunes Music Store increases its fee for its music downloads, the law of demand
predicts that
A) the number of iTunes music downloads would increase.
B) there would be no change in the demand for iTunes music downloads.
C) the number of iTunes music downloads would decrease.
D) iTunes music supply would change but demand would not.
5) Which of the following will occur as the price of a good decreases?
A) The demand curve for that good will shift to the left.
B) The demand curve for that good will shift to the right.
C) The quantity demanded for that good will increase.
D) Demand for that good will increase.
6) A demand curve is a graphical representation of
A) consumer tastes. B) national income.
C) the demand schedule. D) relative prices.
7) When economists talk about a demand schedule for a product, they mean
A) the amount of a good that consumers intend to purchase at each price in a set of possible
prices in a given time period.
B) the amount of a good that consumers are able to purchase (though they might not be
willing to) at different prices in a given period of time.
C) the amount of a good that consumers intend to purchase at only one particular price in a
given period of time.
D) the amount of a good that producers are willing to make available for sale at a particular
price in a given time period.
8) Adding the quantities demanded by all consumers at every price will yield
A) the market clearing price.
B) the number of consumers.
C) the total substitution effect from a price change.
D) the market demand curve.
9) When the price of a good falls, there will be
A) an outward shift in the good s demand curve.
B)
b
oth an outward shift in the good s demand curve and a movement along the good s
demand curve.
C) a movement along the good s demand curve.
D) no change in quantity demanded.
10) In deriving the demand schedule for a good, economists assume that
A) consumers have equal incomes to allocate among goods.
B) a consumer will allocate all of her income to one good.
C) all other influences on demand except the product price are held constant.
D) reported income changes at each point on the demand schedule.
11) A demand schedule provides
A) the quantities of a good people are willing to sell every year.
B) the amount of a good a person wants to sell during a given time period.
C) the alternative quantities demanded for a given time period at different possible prices.
D) the amount of a good a person wants at different times of the day.
12) An increase in quantity demanded is caused by
A) an increase in income.
B) a decrease in the price of the good.
C) a decrease in the price of a complement.
D) a change in expectations about price in the future.
13) Gasoline prices in the United States decreased significantly between 2008 and 2009. A decrease
in the price of gasoline, holding other things constant, will cause which of the following to
occur?
A) increase the demand for gasoline.
B) decrease the demand for gasoline.
C) increase the quantity of gasoline demanded.
D) decrease the quantity of gasoline demanded.
14) A schedule of how much of a good people will purchase for a range of possible prices during a
specified time period, other things constant, is the definition of
A) supply. B) demand.
C) a purchasing contract. D) an economic market.
15) The market demand curve for a particular good
A) is the horizontal sum of all individual demand curves for the good.
B) may be less than an individual demand curve for the good.
C) may or may not show a direct relationship between price and quantity demanded.
D) will not be affected by any of the determinants of individual demand.
16) A market demand schedule for a product indicates that
A) as the product s price falls, consumers buy less of the good.
B) there is a positive relationship between price and quantity demanded.
C) as a product s price rises, consumers buy more of the good.
D) there is a negative relationship between price and quantity demanded.
17) Graphically, a market demand curve is found by
A) taking the average of all prices that people are willing to pay.
B) summing the quantities demanded by all individuals at each price.
C) summing the prices each consumer would pay for each quantity.
D) taking the average of the individual demand curves.
18) Here s what we know about last year s weekly demand for 2 night DVD rentals in the Village of
Harmony: When P $3, Qd 100; at P $5, Qd 75; and when P $7, Qd 50. This year the
village population has increased by 25%. What impact is this most likely to have?
A) Each individual s demand for DVD rentals will increase.
B) Each individual s demand curve for DVD rentals will shift to the left.
C) The market demand curve for DVD rentals shifts left.
D) The market demand for DVD rentals increases.
19) The alternative quantities demanded for a given time period at different possible prices is
known as
A) absolute demand. B) a demand schedule.
C) real demand. D) constant demand.
20) For a demand schedule, which of the following is held constant?
A) relative prices B) quantity demanded
C) quality of the good D) nominal prices
21) Four points on a demand schedule are given: $12, 2 units; $10, 1 unit; $15, 1.5 units; and $2, 4
units. Which combination is inconsistent with the law of demand?
A) $12 and 2 units B) $10 and 1 unit
C) $15 and 1.5 units D) $2 and 4 units
22) A demand schedule
A) holds all prices constant. B) is only for a given time period.
C) holds quantity constant. D) is for a given variety of goods.
23) A demand curve is derived from
A) the production possibilities curve. B) consumer s income.
C) a demand schedule. D) an equilibrium.
24) A demand curve represents a(n)
A) direct relationship between price and quantity demanded.
B) direct relationship between price and demand.
C) indirect or inverse relationship between price and quantity demanded.
D) indirect relationship between price and supply.
25) A demand curve is a
A) graphical representation of the demand schedule.
B) graphical representation of alternative demands.
C) horizontal line connecting amounts demanded at various income levels.
D) graphical relationship, that includes several things such as tastes, time, and supply.
26) Refer to the above figure. Which panel best demonstrates the demand curve?
A) Panel A. B) Panel B. C) Panel C. D) Panel D.
27) An indirect or inverse relationship between price and quantity demanded is
A) the market clearing price. B) a change in demand.
C) a supply curve. D) a demand curve.
28) By summing the quantities demanded by individuals at each price we obtain the
A) equilibrium price. B) market demand curve.
C) market supply curve. D) individual demand curve.
29) We are given the individual demand curves for all of the people that consume Good Y. Which
statement is true about the market demand curve for Good Y?
A) The market demand curve is obtained by horizontally summing the individual demand
curves.
B) The market demand curve is obtained by vertically summing the individual demand
curves.
C) The market demand curve cannot be obtained because information on prices is missing.
D) The market demand curve cannot be obtained from individual demand curves.
30) A market demand curve is found by
A) adding the prices each consumer would pay for each quantity.
B) adding the prices and the quantities demanded by a consumer.
C) adding the quantities demanded for each individual consumer at each price.
D) taking the demand curve of the representative consumer.
216 Miller Economics Today, 16th Edition
Price Quantity Demanded
Per DVD Buyer 1 Buyer 2 Buyer 3 Buyer 4
$20 0 0 1 0
18 0 1 3 0
16 1 2 5 1
14 2 4 7 3
12 3 6 9 6
10 4 8 11 10
8 5 11 13 15
31) Refer to the above table. What is the market quantity demanded of DVDs at a price of $12?
A) 6 B) 9 C) 12 D) 24
32) Refer to the above table. What is the market quantity demanded at a price of $8?
A) 5 B) 15 C) 35 D) 44
33) Refer to the above table. Suppose Buyer 2 leaves the market. What is the new market quantity of
DVDs demanded at a price of $10?
A) 33 B) 25 C) 22 D) 8
34) Demand is a schedule that shows
A) a set of possible prices for a good and the quantities of the good that will be purchased at
each of those prices.
B) how much income it takes to afford various quantities of a good.
C) the relationship between the cost of producing a good and the price that sellers will
charge.
D) how population changes will affect the amount of a good that is needed.
35) Which of the following is NOT a determinant of demand?
A) consumers incomes B) prices of other goods
C) consumers tastes D) production technology
36) When McDonald s runs a special for hamburgers reducing the price of Big Macs to $0.99 with all
other factors held constant
A) there is likely to be an increase in the quantity of Taco Bell sChalupas demanded assuming
Big Macs and Chalupas are substitutes.
B) there is likely to be a decrease in demand for Taco Bell sChalupas assuming Big Macs and
Chalupas are substitutes.
C) there is likely to be an increase in demand for Taco Bell sChalupas assuming Big Macs and
Chalupas are substitutes.
D) there is likely to be an increase in demand for McDonald sBig Macs assuming Big Macs
and Chalupas are substitutes.
37) What information is provided by a demand curve? What variables are measured along the axes
of the graph?
38) Explain how a market demand curve is found.
218 Miller Economics Today, 16th Edition
3.3 Shifts in Demand
1) Which of the following statements is FALSE about the demand curve?
A) An increase in demand shifts the demand curve to the left, closer to the price axis.
B) When only the price of a good changes, there is movement along the demand curve but no
change in demand.
C) A change in demand is graphically shown by shifting the entire demand curve.
D) When demand decreases, there is a drop in the quantity demanded at each price.
2) Which of the following will cause a movement along the demand curve instead of a shift of the
demand curve?
A) Income
B) Tastes and preferences
C) Expectations of the future price of a good
D) none of the above
3) Which of the following is a determinant of consumer demand?
A) Expectation of the future relative price of a product
B) Taxes imposed on firms that sell the product
C) Cost of inputs used to produce the product
D) Number of firms that produce the product
4) If more buyers came into the market for a good, we would expect to see the market demand
curve
A) shift inward and to the left.
B) remain unchanged since none of the determinants of individual demand changed.
C) shift outward and to the right.
D) reflect a positive relationship between price and quantity demanded.
5) Suppose that short skirts that were fashionable in the 1990s become unfashionable in the late
2000s. If other factors were held constant, then there would be
A) a rightward movement along the supply curve.
B) a rightward shift of the demand curve.
C) a leftward shift in the demand curve.
D) a leftward movement along the supply curve.
6) Suppose a college increases the wages paid to student employees. Which of the following
options is the best description of the most likely effect of the increase in wage earnings on the
demand curve for school sweatshirts in the bookstore?
A) The demand curve shifts to the right.
B) The demand curve shifts to the left.
C) A leftward movement along the demand curve.
D) A rightward movement along the demand curve.
7) An increase in demand is shown graphically by
A) a shift of the demand curve to the left.
B) a movement up along the existing curve.
C) a shift of the demand curve to the right.
D) a movement down the existing curve.
8) If a demand curve shifts, we know that
A) the price of the good itself is not a factor.
B) the price of the good itself is a factor.
C) the price of the good and supply are the major factors.
D) the price of the good and demand are major factors.
9) Which of the following statements is FALSE?
A) If there is an increase in the demand for a product, consumers want to buy more of the
product at each and every possible price.
B) A decrease in demand shifts the demand curve leftward toward the origin, while a
decrease in quantity demanded involves a movement upward along a particular demand
curve.
C) If the price of a good rises, quantity demanded of the good decreases and the demand
curve shifts toward the origin as long as supply is static.
D) A change in the demand for a product is caused by factors other than changes in the
product s price.
10) A demand curve for a normal good
A) slopes upward and to the right.
B) is constructed based on the assumption that income is rising.
C) is constructed based on the assumption that an inverse relationship exists between price
and income.
D) shows the inverse relationship between price and quantity demanded.
11) Which of the following statements is FALSE?
A) An increase in income causes an increase in the demand for a normal good.
B) An increase in income causes a decrease in the demand for an inferior good.
C) A decrease in income causes the demand curve for a normal good to shift to the left.
D) An increase in income causes the demand curve for an inferior good to shift to the right.
12) Suppose an individual experiences a permanent increase in income. As a result of this increased
income, further assume that the individual eats dinner at restaurants more frequently each
month. This information suggests that dinners at restaurants for this individual are
A) an inferior good. B) a substitute good.
C) a normal good. D)
b
oth complimentary and inferior.
13) In economic terminology, a normal good is a good
A) on which a monetary value cannot be placed.
B) that is liked only by normal people.
C) for which demand increases when price increases.
D) for which demand increases when income increases.
14) In economic terminology, an inferior good is a good
A) that no one will purchase.
B) that doesn t work properly.
C) that has no monetary value.
D) for which demand increases as income decreases.
15) If the demand of a good is inversely related to income, it must be
A) a bad good. B) an inferior good.
C) a normal good. D) an everyday product.
16) If an increase in the incomes of people who live in the Los Angeles area leads to an increase in
the demand for season tickets for games played by the Los Angeles Lakers professional
basketball team, then these season tickets are
A) a normal good. B) an inferior good.
C) an income complement. D) an income substitute.
17) An inferior good is one for which
A) demand increases as income increases. B) demand decreases as income increases.
C) the demand curve is vertical. D) the demand curve slopes up.
18) For a normal good, an increase in consumer income will lead to
I. a movement down the demand curve
II. a rightward shift in the demand curve
III. a reduction in supply
A) I only B) II only C) III only D) Both II and III
19) Sarah gets a salary increase of 20 percent. Before her raise, she purchased 5 pounds of
hamburger and 1 pound of beef stew a month. After her raise, she consumes 2 pounds of
hamburger and 3 pounds of beef stew a month. If everything else is held constant, we know that
A) hamburger is an inferior good and beef stew is a normal good for Sarah.
B) hamburger is a normal good and beef stew is an inferior good for Sarah.
C)
b
oth hamburger and beef stew are normal goods for Sarah.
D)
b
oth hamburger and beef stew are inferior goods for Sarah.
20) Fashion trends are a nonprice determinant for demand because
A) they cause a movement along the demand curve.
B) they influence people s tastes and preferences in clothing.
C) they change the supply of accessories.
D) they do not affect demand.
21) Which of the following will cause a rightward shift of the demand curve?
A) a decrease in the cost of production
B) a decrease in the price of the good
C) an increase in the expected future price of the good
D) all of the above
22) Which one of the following is NOT a determinant of demand?
A) Prices of related goods B) Cost of inputs in production
C) Income D) Future price expectations
23) All of the following will affect the position of the demand curve EXCEPT
A) income.
B) taste and preference.
C) changes in expectations of future relative prices.
D) prices of resources used to produce the product.
24) Assume that coffee and tea are substitutes. Given a downward sloping demand curve for tea, an
increase in the price of tea will cause
A) an increase in the demand for coffee.
B) a decrease in the demand for coffee.
C) a leftward shift of the demand curve for tea.
D) a leftward shift in the demand for coffee.
25) If goods X and Y are substitute goods, then an increase in the price of Y, other things being
equal,
A) results in a decrease in the amounts of both X and Y consumed.
B) decreases the quantity demanded of Y, but has no effect on the amount of X consumed.
C) results in a decrease in the quantity of Y consumed, but increases the demand for X.
D) has no real effect on the quantity demanded of good Y, but increases the demand for X.
26) If bagels and croissants are substitute goods, which of the following is likely to occur if the price
of bagels has decreased?
A) The demand curve for bagels shifts to the right.
B) A leftward movement along the bagel demand curve.
C) The demand curve for croissants shifts to the right.
D) The demand curve for croissants shifts to the left.
27) If two goods are substitutes, then
A) an increase in the price of one causes the demand for the other to fall.
B) there is an inverse relationship between changes in the price of one good and changes in
the demand for the other.
C) if the price of one good falls, the demand for the other good falls also.
D) changes in the quantity demanded of one good will not affect the demand for the other.
28) Suppose that goods X and Y are substitutes and the price of good Y falls. We would then expect
A) the quantity of good Y demanded to increase and the demand for good X to increase also.
B) an increase in the demand for good X and a decrease in the quantity of good Y demanded.
C) an increase in the quantity demanded of good Y and a decrease in the demand for good X.
D) an increase in the demand for both good X and good Y.
29) After the price of music downloads falls, Phil buys fewer CDs and buys a new MP3 player. For
Phil,
A) music downloads and CDs are complements, and MP3 players and CDs are substitutes
B) music downloads, MP3 players, and CDs are all complements.
C) music downloads and CDs are substitutes, and music downloads and MP3 players are
complements.
D) music downloads, MP3 players, and CDs are all substitutes.
30) An increase in demand for a good can be caused by
A) a decrease in the price of a substitute good.
B) a reduction in income if the good is a normal good.
C) a decrease in the price of a complementary good.
D) an increase in price of a complementary good.
31) We observe that people buy less steak and more potatoes when the price of steak relative to
potatoes increases. This indicates that steak and potatoes are
A) substitutes. B) complements.
C) inferior goods. D) unrelated goods.
32) Suppose a concert by Lady Gaga and a basketball game played by the L.A. Lakers are
substitutes, then which of the following is true?
A) If the price of a ticket to a Lakers game increases, then the demand for Lady Gaga tickets
will fall.
B) If the price of a ticket to a Lakers game decreases, the quantity of Lakers tickets demanded
will increase.
C) If the price of a ticket to a Lakers game increases, then the demand for Lady Gaga tickets
will remain unchanged.
D) The price of a ticket to a Lakers game will always equal the price of a ticket to a Lady Gaga
concert.
33) If two goods, J and K, are complements, then which of the following statements is FALSE?
A) They are consumed together.
B) An increase in the price of J causes the demand for K to rise.
C) When the quantity demanded of J increases, the demand for K increases.
D) A decrease in the price of K causes an increase in the demand for J.
34) Of the following, which is the least likely to be an example of substitute goods?
A) Beer and pretzels B) Margarine and butter
C) Beef and chicken D) Tea and coffee
35) Which of the following pairs of goods is least likely to be a pair of complements?
A) Gasoline and motor oil B) Hot dog buns and hot dogs
C) Beer and wine D) Razors and razor blades
36) Suppose we observe that the demand for eggs increases when people buy more potatoes. We
can conclude that eggs and potatoes are
A) inferior goods. B) normal goods. C) complements. D) substitutes.
37) When the price of personal computers decreased in the 2000s, there was an increase in the
demand for flash memory drives because personal computers and flash memory drives are
A) substitute goods. B) capital goods.
C) inferior goods. D) complementary goods.
38) If the price of personal computers were to rise, then the demand for printers would decrease
because personal computers and printers are
A) complementary goods. B) consumer goods.
C) inferior goods. D) substitute goods.
39) In the above figure, when the price of Good B increases, the result can be shown by
A) the movement from D1to D2in Graph A.
B) the movement from D2to D1in Graph A.
C) the movement along D0from P1to P2.
D) the movement along D0from P2to P1.
40) In the above figure, an increase in income is best demonstrated by a
A) shift of D1to D2in Graph A, if good A is a normal good.
B) shift of D2to D1in Graph A, if good A is a normal good.
C) movement along D0from P1to P2in Graph B.
D) movement along D0from P2to P1in Graph B.
41) In the above figure, the demand curve for Good A shifts from D1to D2in Graph A when the
price of Good B changes from P1to P2in Graph B. We can conclude that
A) Good A and Good B are substitutes.
B) Good A and Good B are complements.
C) Good A is a normal good but Good B is an inferior good.
D) Good A and Good B are unrelated.
42) Suppose Good A is a normal good. Which of the following will increase the demand for Good
A?
A) An increase in the price of its substitutes
B) A lower expected future relative price of A
C) An increase in the price of its complements
D) A decrease in income
43) If the price of hot dogs increases, the demand for hot dog buns will
A) increase. B) decrease.
C) remain constant. D) shift to the right.
44) If the price of apples goes down, then the demand for pears will
A) increase, assuming apples and pears are substitutes.
B) decrease, assuming apples and pears are substitutes.
C) decrease, assuming apples and pears are complements.
D) remain constant, assuming apples and pears are related goods.
45) There is an increase in the demand for cream when the price of coffee falls. Other things
constant, we can conclude that coffee and cream are
A) substitute goods. B) inferior goods.
C) independent goods. D) complementary goods.
46) An increase in demand is represented by a
A) shift of the demand curve to the left. B) shift of the demand curve to the right.
C) movement down the demand curve. D) movement up the demand curve.
