File: Chapter 04 Supply and Demand
True/False
[Question]
1. If cigar prices tripled while sales of cigars rose 30 percent, this would likely be due to a shift
in demand.
2. According to the law of demand, only the price of a good influences the amount people will
choose to purchase.
3. A demand curve is downward sloping because as the price of a good falls, demanders will
substitute some other good for that good whose price has fallen.
4. A change in the price of carrots will cause a movement along the demand curve for carrots
and a shift in the demand for substitute vegetables.
5. Movements down the rows (A to E) in the demand table are represented by movements up
along a demand curve.
6. The law of supply states that more of a good will be supplied the lower its price, other things
constant.
7. Suppliers will supply more of a good when the price of that good rises because the
opportunity cost of not producing that good has risen.
8. An increase in the number of firms causes the price firms are able to charge to fall, which
results in a movement along the market supply curve.
9. An improvement in the technology for producing a good will shift the supply curve for that
good to the left.
10. At a price of $3.50, the quantity supplied by the market will be 14.
Price
Ann’s
Supply
Barry’s
Supply
Charlie’s
Supply
Market
Supply
$0.00
0
0
0
0
0.50
1
0
0
1
1.00
2
1
0
3
1.50
3
2
0
5
2.00
4
3
0
7
2.50
5
4
0
__
3.00
6
5
0
__
3.50
7
5
2
__
4.00
8
5
2
__
11. When quantity demanded is greater than quantity supplied, the resulting shortage causes the
price to fall.
12. An increase in demand causes equilibrium price and quantity to rise, other things constant.
Multiple Choice
[Question]
13. The law of demand states that the quantity demanded of a good is inversely related to the
price of that good. Therefore, as the price of a good goes:
A. up, the quantity demanded also goes up.
B. up, the quantity demanded goes down.
C. down, the quantity demanded goes down.
D. down, the quantity demanded stays the same.
14. The law of demand states that consumers buy more of a good when its price declines:
A. because their income increases at the same time.
B. only if their income increases at the same time.
C. even if other demand determinants change at the same time.
D. provided all else remains constant.
15. According to the law of demand, an increase in the price of baseball trading cards causes:
A. people to buy fewer trading cards.
B. people to buy more trading cards.
C. the scarcity of baseball trading cards to increase.
D. baseball trading cards to grow in abundance.
16. Which of the following situations best demonstrates the law of demand?
A. Movie-goers react to an increase in the price of a theater ticket by seeing fewer movies per
year.
B. Movie-goers see fewer movies per year due to an overall decrease in the quality of newly
released motion pictures.
C. A drought causes a decrease in the availability of pumpkins, resulting in fewer jack-o–
lanterns displayed on Halloween.
D. An increase in the number of people writing Economics textbooks results in a decrease in
average textbook prices.
17. Refer to the graphs shown. The curve that best demonstrates the law of demand is:
A. I.
B. II.
C. III.
D. IV.
18. Refer to the graphs shown. If the quantity demanded by consumers is the same for every
price, then the demand curve would look like:
A. I.
B. II.
C. III.
D. IV.
19. Suppose that college tuition is higher this year than last year and that more students are
enrolled in college this year than last year. Based on this information, we can best conclude that:
A. the law of demand is invalid.
B. despite the increase in price, quantity demanded rose due to some other factor changing.
C. this situation has nothing to do with the law of demand.
D. the demand for a college education is positively sloped.
20. The explanation for the law of demand involves:
A. suppliers’ ability to substitute inputs.
B. consumers’ ability to substitute different goods.
C. the government’s ability to set prices.
D. the market’s ability to equate supply and demand.
21. If the price of movies on DVD rises while the price of movies purchased on demand through
the Internet remains the same, the law of demand predicts that consumers will:
A. substitute movies on DVD for movies on the Internet.
B. substitute movies on the Internet for movies on DVD.
C. buy only movies on DVD.
D. buy only movies on the Internet.
22. If the price of chicken rises and the price of beef does not rise, consumers will respond by:
A. substituting beef for chicken.
B. substituting chicken for beef.
C. reducing purchases of beef and chicken.
D. increasing purchases of beef and chicken.
23. According to the law of demand an increase in the price of gasoline will:
A. increase the quantity demanded of gasoline, other things constant.
B. decrease the quantity demanded of gasoline, other things constant.
C. increase the demand for gasoline.
D. decrease the demand for gasoline.
24. The distinction between demand and the quantity demanded is best made by saying that:
A. demand is represented graphically by a curve and quantity demanded is a point on that curve.
B. the quantity demanded is represented graphically by a curve and demand is a point on that
curve.
C. the quantity demanded is in a direct relation with prices, whereas demand is in an inverse
relation.
D. the quantity demanded is in an inverse relation with prices, whereas demand is in a direct
relation.
25. The use of the phrase “other things constant” in supply and demand analysis indicates that:
A. an equilibrium price has been reached.
B. an equilibrium quantity has been reached.
C. we are considering changes in just one factor.
D. we are considering all the changes which might take place in actual markets.
26. Three hurricanes, combined with the already high real-estate prices, have made people
reconsider whether to retire to Florida. The cost of homeownership has increased due to stricter
building codes. The influx of retirees is not expected to change because the baby boom
generation is approaching retirement age and Florida has long attracted many retirees. Which of
the following factors is tending to move the demand curve for Florida housing to the right?
A. The aging of the baby boomers, increasing the number of people who are retiring
B. The increase in the cost of insurance
C. The already high real-estate prices
D. The current high construction costs
27. Sometimes price cuts can have an unintended result of consumers waiting for deeper
discounts. What does this waiting suggest about supply and demand?
A. The demand curve slopes the wrong way because price cuts have lead to smaller sales.
B. If buyers are buying less when price falls, the supply curve must have moved left.
C. If buyers are buying less when price falls, the supply curve must have moved right.
D. Price cuts have changed buyers’ expectations, and the change in expectations has moved the
demand curve left.
28. Tuition and fees for four year colleges in the United States have risen over five percent per
year in the recent past. One cause for the increase in price has been an increase in demand for
college education. In the standard model, what could be a possible explanation for the increase in
the demand for college education?
A. More colleges have been established
B. The cost of two-year colleges has declined over the same period
C. Income in the United States has risen
D. The price of all other goods in the economy has risen 3 percent over the same period
29. The growing popularity of a commercial weight-loss diet that includes reducing the amount
of carbohydrates consumed will cause:
A. an increase in the demand for bread.
B. a decrease in the demand for bread.
C. a movement down and to the right along the demand for bread curve.
D. a movement up and to the left along the demand for bread curve.
30. Given that diesel cars get much better gas mileage than the typical car, an increase in the
price of gasoline would be expected to:
A. increase the demand for diesel cars.
B. decrease the demand for gasoline.
C. decrease the demand for diesel cars.
D. increase the demand for gasoline.
31. The effect of higher gasoline prices is most likely to:
A. increase the demand for hybrid cars and increase the demand for the gas guzzler Hummer.
B. decrease the demand for hybrid cars and decrease the demand for the gas guzzler Hummer.
C. increase the demand for hybrid cars and decrease the demand for the gas guzzler Hummer.
D. decrease the demand for hybrid cars and increase the demand for the gas guzzler Hummer.
32. Which of the following would likely result in an increase in the demand for beef?
A. A decrease in the supply of beef
B. An increase in family incomes
C. An increase in the price of feed grains for cattle
D. A decrease in the price of pork
33. Which of the following would cause quantity demanded to change without changing the
demand curve?
A. A change in income
B. A change in the price of the good
C. Achange in tastes and preferences
D. Achange in the price of a substitute good
34. Refer to the graphs shown. The effect of an increase in price is best shown by which arrow?
A. A
B. B
C. C
D. D
35. Refer to the graphs shown. If consumers began purchasing more of this product due to a
decrease in price, this would be shown by arrow:
A. A.
B. B.
C. C.
D. D.
36. Which of the following is not held constant as you move along the demand curve?
A. The price of that good
B. The price of other goods
C. The incomes of consumers
D. The preferences of consumers for the good
37. Refer to the graphs shown. What arrow shows the effect of an increase in the number of
consumers in the market on the demand for CDs?
A. A
B. B
C. C
D. D
38. Refer to the graphs shown. The effect of an increase in the price of CDs on consumers is
best shown by arrow:
A. A.
B. B.
C. C.
D. D.
39. Refer to the graph shown. The quantity demanded when price is $16.00 per week is:
A. 2 CDs per week.
B. 4 CDs per week.
C. 6 CDs per week.
D. 8 CDs per week.
40. Refer to the graph shown. If the price is changed from $12.00 to $4.00, the quantity
demanded increases by:
A. 2 CDs per week.
B. 4 CDs per week.
C. 6 CDs per week.
D. 8 CDs per week.
41. Refer to the graph shown. A movement from point E to point D is caused by:
A. an increase in the price of CDs from $12.00 to $16.00.
B. a decrease in the price of CDs from $16.00 to $12.00.
C. an increase in consumer income.
D. an increase in the price of DVDs.
42. Given the graph, the quantity that would be associated with the price of $4 in a demand table
would be:
A. 1.
B. 2.
C. 3.
D. 4.
43. Given the graph, the quantity that would be associated with the price of $1 in a demand table
would be:
A. 6.
B. 5.
C. 4.
D. 3.
44. Consider the following demand table and the graph.
Which of the demand curves best reflects the demand table?
A. A
B. B
C. C
D. D
45. Refer to the graphs shown. Assume the graph reflects demand in the egg market. Which
arrow best captures the impact of increased consumer concern about cholesterol on the egg
market?
A. A
B. B
C. C
D. D
46. Assume the graph shown reflects demand in the automobile market. Which arrow best
captures the impact of increased consumer income on the automobile market?