In general, what happens to the price of a good or service when a shortage of that good or service occurs?

It increases until quantity demanded equals quantity supplied.

The price of home computers rises. According to the law of SUPPLY, manufacturers will respond to this price increase by

increasing computer production.

Which of these events would indicate a movement along a SUPPLY curve for batteries?

Battery makers raise the price from $3.50 to $3.95.

How can expectations about the future change consumer behavior?

Immediate demand for a good will rise if its price is expected to rise.

What does elasticity of DEMAND measure?

how buyers will change their quantity demanded when price rises or falls

How does specialization affect production?

It makes workers more efficient.

How does an increase in population affect the DEMAND curve?

The entire curve shifts to the right.

What effect do rising input costs have on the price of a good?

The good becomes more expensive to produce.

Which of the following actions by the government constitutes a subsidy?

a payment to farmers for not cultivating land

A DEMAND curve is accurate only as long as ceteris paribus is true. What does this Latin phrase mean?

All things other than price stay constant.

What does it mean when you have demand for a good or service?

You are willing and able to buy the good at the given price.

When is a market at equilibrium?

when quantity demanded equals quantity supplied

What does a SUPPLY schedule show?

supply for a good at many prices

How does new technology generally affect production?

It lowers cost and increases supply.

Why does a government place price ceilings, such as rent control, on some “essential” goods?

to limit the impact of equilibrium pricing

Which of the following are ways the government controls markets?

price ceilings and price floors

Which are the government’s three goals for promoting economic strength?

high employment, steady growth, and stability

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Demand, Supply, & Equilibrium

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Questions 31

Answers

1
What can cause an entire DEMAND curve to shift?
a change in demographics
an increase in price
nothing
a decrease in price
2
In general, what happens to the price of a good or service when a shortage of that good or service occurs?
It decreases until quantity demanded equals quantity supplied.
It remains unchanged while quantity demanded drops.
A price ceiling is imposed, lowering the price to meet the demand.
It increases until quantity demanded equals quantity supplied.
3
The price of home computers rises. According to the law of SUPPLY, manufacturers will respond to this price increase by
increasing computer production.
keeping computer production steady.
decreasing computer production.
halting computer production.
4
Owners of skis have to buy ski boots to use the skis. What do economists call skis and ski boots?
complements
inferior goods
substitutes
elastic
5
Which of these events would indicate a movement along a SUPPLY curve for batteries?
Battery makers raise the price from $3.50 to $3.95.
Workers at a major battery factory go on strike and stop production.
New law requires battery makers to produce environmentally safe batteries.
A new trade agreement enables stores to import foreign batteries.
6
Why does every decision involve trade-offs?
Incomes are not equal.
Decisions are all different.
Everyone has to make decisions.
Resources are limited.
7
In 1971 the economy suffered a rapid increase in cost of living. To help, the govt froze wages & prices. This is called
rationing.
a price ceiling.
a price floor.
disequilibrium.
8
How can expectations about the future change consumer behavior?
Immediate demand for good will rise if good is expected to be plentiful.
Immediate demand for a good will rise if its price is expected to rise.
Immediate demand for good will fall if price is expected to stay the same.
Immediate demand for good will drop if there are no substitutes available.
9
What does elasticity of DEMAND measure?
a decrease in the quantity demanded
the amount of time consumers need to change their demand for a good
an increase in the quantity available
how buyers will change their quantity demanded when price rises or falls
10
John gets a raise & decides to buy fancy pasta vs cheaper instant noodles. What are the instant noodles to John?
unitary elastic
complements
market demand
inferior goods
11
How does specialization affect production?
It makes workers more efficient.
It slows down production.
It decreases revenue.
It increases cost.
12
How does an increase in population affect the DEMAND curve?
The entire curve shifts to the right.
A point on the curve moves up.
A point on the curve moves down.
The entire curve shifts to the left.
13
What effect do rising input costs have on the price of a good?
The good becomes dependent on government regulation.
The good becomes more expensive to produce.
It has no effect on the cost of the good.
The good becomes cheaper to produce.
14
Which of the following actions by the government constitutes a subsidy?
a price floor on wages
a payment to farmers for not cultivating land
an excise tax on cigarettes
a requirement to use lead-free fuel
15
Ultimately, the main factor that drives decisions about production is the
desire to maximize profits.
availability of natural resources.
public need for better goods.
government regulations and rules.
16
If a baker’s SUPPLY of bread exceeds the DEMAND for bread, he should
sell only bread.
raise the price of bread.
stop selling bread.
lower the price of bread.
17
What must a nation’s economy do in order to improve the standard of living?
reach economic equity
remain stable
grow
allow central planning
18
A graph of the information in a SUPPLY schedule creates which of the following?
a demand curve
the supply of goods available
the quantity of goods demanded
a supply curve
19
When government intervention causes the SUPPLY of a good to rise, what happens to the SUPPLY curve?
The supply curve is not affected.
It shifts to the right.
It shifts to the left.
It reverses direction.
20
A DEMAND curve is accurate only as long as ceteris paribus is true. What does this Latin phrase mean?
Supply can keep up with prices.
Goods are used in place of one another.
Demand for goods remains elastic.
All things other than price stay constant.
21
What does it mean when you have demand for a good or service?
You can afford the good but may be unwilling to buy it.
You are willing and able to buy the good at the given price.
You are able to buy the good but not at the given price.
You want the good but may not have the money for it.
22
When is a market at equilibrium?
when quantity demanded equals quantity supplied
when unsold goods begin to pile up
when prices equal the cost of production
when suppliers begin to reduce prices
23
What does a SUPPLY schedule show?
quantity supplied at one price
changes in costs of labor and parts
factors that could influence supply
supply for a good at many prices
24
What does a company generally do when demand for its goods goes up?
It rations goods.
There is no set response.
It raises prices.
It cuts prices.
25
How does new technology generally affect production?
It increases cost and decreases supply.
It has very little effect on production.
It lowers cost and decreases supply.
It lowers cost and increases supply.
26
Why does a government place price ceilings, such as rent control, on some “essential” goods?
to limit the impact of equilibrium pricing
to prevent the development of a black market
to help reduce demand for these goods
to encourage an increase in supply of necessary items
27
If prices rise but income stays the same, what is the effect on the quantity DEMANDED?
Quantity demanded increases.
More goods are bought.
Demand stays the same.
Fewer goods are bought.
28
Which of the following are ways the government controls markets?
price ceilings and price floors
subsidies and disequilibrium
shortages and surpluses
equilibrium price and equilibrium point
29
The price ceiling that was used to control the price of housing in New York City and other cities was called
equilibrium price.
housing control.
rent abatement.
rent control.
30
Which are the government’s three goals for promoting economic strength?
high employment, increased spending, and low taxes
high employment, steady growth, and stability
low unemployment, low prices, and low taxes
steady growth, high prices, and innovation
31
The price of a popular shoe rises from $28 to $39 a pair. What will happen to DEMAND for the shoe?
It will remain constant.
It will decrease.
It will disappear.
It will increase.

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