48 Questions
If the price of a substitute good rises, what is likely to happen to the demand for the original good?
The demand for the original good will increase (demand curve shifts right)
What happens to the demand for a good if the price of a complementary good falls?
The demand for the good will increase (demand curve shifts right)
What does an increase in population generally lead to in terms of demand?
An increase in demand
Which of these is NOT an important demand shifter according to the text?
Changes in government policies
What happens to the demand curve if there is an increase in income for a normal good?
The demand curve shifts right
For which type of goods does a fall in income lead to an increase in demand?
Inferior goods
What happens to the demand for normal goods when income increases?
Demand increases
How do changes in preferences and tastes affect the demand for a good?
Demand increases when tastes change in favor of the good
What effect does an expectation of a future rise in price of a good have on current demand?
Increases current demand
How does an increase in population affect the demand for a good?
Increases demand for the good
What does market demand refer to?
Sum of all individual demand for a particular good or service
What does a supply curve show?
Quantity supplied at various prices
How do improvements in technology affect the supply curve?
Shifts the supply curve right
What do sellers do if there is excess supply or a surplus in the market?
Lower the price to increase sales and move toward equilibrium
What are the three steps to analyzing changes in equilibrium?
Decide whether an event shifts the supply or demand curve (or both), decide whether the curve(s) shift(s) to the left or to the right, use the supply and demand model to see how the shift affects equilibrium price and quantity.
What happens when there is excess demand or shortage in the market?
Suppliers raise the price to decrease sales and move toward equilibrium
How does an expectation of a future rise in price of a good affect the demand today?
Increases demand today
What happens to the supply curve if there is an increase in the number of producers of a good?
Shifts right
What happens to the equilibrium price and quantity when the demand curve shifts to the right?
Price increases, quantity increases
What is the effect on supply if there is a decrease in the price of an input?
Increases supply
How do changes in preferences and tastes affect the demand for a good?
Increase demand for the good
What happens to sales this year if prices for houses are expected to increase next year?
Increase due to expectation of future rise in price
What happens to the demand for a good if the price of a complementary good falls?
The demand for the good will increase (demand curve shifts right)
What do changes in tastes affect in terms of demand for a good?
The quantity demanded at various prices
What happens to the demand for a good if there is an increase in income?
It depends on whether the good is normal or inferior
What happens to the market equilibrium if both supply and demand increase?
The equilibrium quantity increases, but the change in equilibrium price is ambiguous
What happens to the demand for a good if there is an expectation of a future rise in price?
The current demand for the good increases
What happens to the market equilibrium if supply decreases and demand increases?
The equilibrium price increases, but the change in equilibrium quantity is ambiguous
What happens to the demand for an inferior good when income increases?
Demand decreases
How do changes in tastes and preferences affect the demand for a good?
It depends on the nature of the good
What causes a supply curve to shift left?
Expectation of future rise in price of the good
What does market demand refer to?
The demand for a good by all consumers in the market
What is the effect on supply if there are substitutes in production processes?
Supply decreases
What happens to equilibrium price and quantity when both supply and demand curve shift right?
Equilibrium price and quantity both increase
What causes a decrease in profits and discourages supply?
Expectation of future fall in price of the good
What happens to sales this year if prices for houses are expected to decrease next year?
Sales this year will decrease
What is the effect on supply if there are complements in production processes?
Supply increases
What happens to the demand for a good if consumers expect a future decrease in price?
The demand decreases today
How do changes in technology affect the supply curve?
The supply curve shifts right
What does an increase in population generally lead to in terms of demand?
Increase in demand for goods
What happens to the equilibrium price and quantity when the supply curve shifts to the left and the demand curve shifts to the right?
Price increases, quantity increases
What happens to sellers if there is excess demand or a shortage in the market?
They raise the price due to too many buyers chasing too few goods
What causes a supply curve to shift left?
Expectation of a future rise in price of a good
What happens to individual demand curves when summed horizontally?
They form market demand curve
How do changes in preferences and tastes affect the demand for a good?
They cause a shift of the entire demand curve
What happens to sales if prices for houses are expected to increase next year?
Sales decrease this year due to anticipation of higher prices next year
What does market demand refer to?
Sum of all individual demands for a particular good or service
How do changes in income affect normal goods?
Demand increases when income increases
Test your knowledge of the supply and demand model in competitive markets, including key elements, demand and supply curve shifts, market equilibrium, and changes in demand. Understand the behavior of buyers and the quantity demanded at various prices.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
