Questions and Answers
Graphically, the market demand curve is:
Assuming conventional supply and demand curves, changes in the determinants of supply and demand will:
One can say with certainty that equilibrium price will decline when supply:
Other things equal, which of the following might shift the demand curve for gasoline to the left?
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Because of unseasonably cold weather, the supply of oranges has substantially decreased. This statement indicates that:
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In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by:
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Which of the following statements is correct?
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If X is a normal good, a rise in money income will shift the:
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A decrease in the demand for recreational fishing boats might be caused by an increase in the:
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The demand curve for a product might shift as the result of a change in:
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A government subsidy to the producers of a product:
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The law of supply indicates that:
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The upward slope of the supply curve reflects the:
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A market is in equilibrium:
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There will be a surplus of a product when:
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If we say that a price is too high to clear the market, we mean that:
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When the price of oil declines significantly, the price of gasoline also declines. The latter occurs because of a(n):
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Assume in a competitive market that price is initially above the equilibrium level. We can predict that price will:
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With a downsloping demand curve and an upsloping supply curve for a product, an increase in consumer income will:
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If L and M are complementary goods, an increase in the price of L will result in:
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At the current price there is a shortage of a product. We would expect price to:
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Markets explained on the basis of supply and demand:
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The rationing function of prices refers to the:
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Assume product A is an input in the production of product B. In turn, product B is a complement to product C. We can expect a decrease in the price of A to:
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An increase in the excise tax on cigarettes raises the price of cigarettes by shifting the:
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An increase in product price will cause:
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When an economist says that the demand for a product has increased, this means that:
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In constructing a stable demand curve for product X:
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By an increase in demand we mean that:
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In moving along a stable supply curve which of the following is not held constant?
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The location of the supply curve of a product depends on:
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Allocative efficiency involves determining:
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At the point where the demand and supply curves intersect:
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Digital cameras and memory cards are:
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Which of the following would not shift the demand curve for beef?
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Suppose that in each of four successive years producers sell more of their product and at lower prices. This could be explained:
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The income and substitution effects account for:
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Other things equal, if the price of a key resource used to produce product X falls, the:
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The demand curve shows the relationship between:
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The law of demand states that:
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With a downsloping demand curve and an upsloping supply curve for a product, placing an excise tax on this product will:
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When product prices change, consumers are inclined to purchase larger amounts of the now cheaper products and less of the now more expensive products. This describes:
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Increasing marginal cost of production explains:
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Steve went to his favorite hamburger restaurant with $3, expecting to buy a $2 hamburger and a $1 soda. When he arrived he discovered that hamburgers were on sale for $1, so Steve bought two hamburgers and a soda. Steve's response to the decrease in the price of hamburgers is best explained by:
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A product market is in equilibrium:
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At the equilibrium price:
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An increase in the price of a product will reduce the amount of it purchased because:
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Allocative efficiency is concerned with:
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Suppose that in 2007 Ford sold 500,000 Mustangs at an average price of $18,800 per car; in 2008, 600,000 Mustangs were sold at an average price of $19,500 per car. These statements:
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If a product is in surplus supply, its price:
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Study Notes
Market Demand and Supply
- Market demand curve is the horizontal sum of individual demand curves.
- Changes in supply and demand determinants likely alter equilibrium price and quantity.
- Equilibrium price declines with an increase in supply when demand decreases.
Demand Shifts
- Demand for gasoline shifts left due to the development of low-cost electric automobiles.
- A decrease in the supply of oranges indicates a decline in available quantities at various prices.
- Increased demand for donuts may be explained by changes in buyer tastes.
Supply and Demand Interactions
- If demand increases and supply decreases, equilibrium price will rise.
- A rise in money income shifts the demand curve for normal goods to the right.
- An increase in the price of outboard motors can decrease the demand for recreational fishing boats.
Understanding Market Equilibrium
- Equilibrium occurs when the amount producers want to sell equals what consumers want to buy.
- A surplus occurs when quantity supplied exceeds quantity demanded; prices tend to adjust upward.
- A shortage signals that quantity demanded exceeds quantity supplied; prices are expected to increase.
Price Effects
- A significant decline in oil prices typically leads to lower gasoline prices due to increased supply.
- When prices are above the equilibrium, we expect price to decrease while quantity demanded increases.
- An increase in excise tax on a product shifts the supply curve for that product leftward.
Elasticity of Supply and Demand
- Movements along the supply curve do not hold certain factors constant, such as the price of the product.
- The rationing function ensures that quantity demanded matches quantity supplied in a competitive market.
Costs and Production
- The upward slope of the supply curve reflects the law of supply: higher prices encourage more production.
- Allocative efficiency determines the output mix that maximizes society's satisfaction.
- Increasing marginal costs explain why supply curves are upsloping.
Consumer Behavior and Choices
- The substitution effect occurs when consumers opt for less expensive products as prices change.
- An increase in consumer income can elevate both equilibrium price and quantity for normal goods.
- In response to decreasing prices, demand often increases as consumers are more willing to purchase.
Complementary and Substitute Goods
- Digital cameras and memory cards are complementary goods; changes in one affect the other.
- Changes in the price of complementary goods can inversely impact the sales of related products.
Summary of Market Concepts
- A product market is in equilibrium when both supply and demand curves intersect.
- At equilibrium price, there are no pressures causing prices to rise or fall.
- Allocative efficiency ensures that resources are utilized effectively to produce goods that society desires most.
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Description
These flashcards cover key concepts from Chapter 3 of the Economics curriculum, focusing on demand and supply curves. Test your understanding of market dynamics and the effects of changes in supply and demand determinants.