Supply/Demand test review

When a consumer is able and willing to buy a good or service, he or she creates which of the following? a. Consumption b. Demand c. Elasticity d. allocation

Law of Demand When prices go up, demand goes down When prices go down, demand goes up Law of Supply- when prices go up, supply goes up, when prices go down, supply goes down

What determines the price and the quantity produced of most goods? the consumer’s perception of necessity the interaction of supply and demand the availability of substitutes for the goods the quality of the goods that are produced

What are inferior goods? a.goods that are not well produced b.goods that no one wants to buy c.goods for which the demand rises when income rises d.goods for which the demand falls when income rises

How is future price related to current demand? a. If the price is expected to rise, current demand will drop b. If the price is expected to fall, current demand will rise. c. If the price is expected to rise, current demand will rise. d. Future price is not related to current demand.

What determines how a change in prices will affect total revenue for a company? elasticity of demand values of elasticity c. the company’s pricing policy d. the consumers’ incomes

What does it mean when the demand for a product is inelastic? a. People will not buy any of the product when the price goes up. b. A price increase does not have a significant impact on buying habits. c. Customers are sensitive to the price of the product. d. There are very few satisfactory substitutes for the product.

What is a basic principle of the law of demand? a. The higher the price, the more people will want the good. b. Everyone has a limited income that they will spend. c. When a good’s price is lower, people will buy more of it. d.Services are of interest in the same way that goods are.

Which of the following is a good that might not be bought when prices rise? a. elastic b. inelastic

What kind of changes would not be expected in the demand of a country that has a growing population? a. a rise in the demand for recreation b. a shift in the demand for high-quality food c. a rise in the demand for shelter d. decreased demand for automobiles

A shift in the demand curve means which of the following? a. a change in demand at every price b. a rise in prices c. a decrease in both price and quantity demanded d. a change in consumer income

When prices rise, which of the following happens to income? a. It goes down b. It rises to meet prices. c. It buys less d.It is used to buy different things.

Which of the following goods would be likely to be bought in the same quantity even if it doubled in price? a. cars B. insulin c. cell phones d. shirts

Which of the following is an example of lower production costs brought about by the use of technology? a. the delivery costs of gasoline to the consumer by diesel trucks b. the use of e-mail to replace slower surface mail c. the making of breads and pastries in local shops rather than large bakeries d. the importing of fresh vegetables from South America rather than using canned vegetables

What do sellers do if they expect the price of goods they have for sale to increase dramatically in the near future? a. sell the goods now and try to invest the money instead of resupplying b. sell the goods now but try to get the higher price for them c. store the goods until the price rises d. store the goods indefinitely regardless of when the price rises

Which of the following is the best example of the law of supply? a. A sandwich shop increases the number of sandwiches they supply every day when the price is increased b. A food producer increases the number of acres of wheat he grows to supply a milling company. c. A catering company buys a new dishwasher to make their work easier. d. A milling company builds a new factory to process flour to export.

When the selling price of good goes up, what is the relationship to the quantity supplied? A. Suppliers supply more B. Suppliers supply less C. Consumers buy more D. Consumers buy less

When a producer is able and willing to produce a good or service, he or she creates A. Supply B. Demand C. Equilibrium D. None of the above

Hot dogs and hot dog buns are what types of goods A. Substitute B. Complementary

If the price of butter goes up, what happens to the demand for margarine? A. It goes up B. It goes down

Give an example of a normal good. Coke and pepsi are what types of goods? What will cause the demand curve to shift? What will cause the supply curve to shift?

What happens when wages are set above the equilibrium level by law? a. Firms tend to try to break the law and hire people at the equilibrium level. b. Firms employ more workers than they would at the equilibrium wage. c. Firms employ fewer workers than they would at the equilibrium wage. d. Firms hire more workers but for fewer hours than they would at the equilibrium wage.

When buyers will purchase exactly as much as sellers are willing to sell, what is the condition that has been reached? a. supply and demand b. equilibrium c. excess demand d. price floor

Which of the following is an example of a good whose price goes down because of improvements in technology? a. computer b. hard-bound books c. running shoes d. typewriters

What happens when the supply of a nonperishable good is greater than the consumer wants to buy? a. the good is discarded b. the good becomes a luxury and the price rises c. either the good remains unsold or the price drops d. either the good is saved for later sale or the price is lowered

Price is the most important determinant to both consumers and producers True False

What happens to a market in equilibrium when there is an increase in supply? a. Excess supply means that producers will make less of the good b. Quantity demanded will exceed quantity supplied, so the price will drop. c. Quantity supplied will exceed quantity demanded, so the price will drop d. Undersupply means that the good will become very expensive.

In a command economy, who has a large role in the setting of prices? People Suppliers Government

A subsidy is a. a tax on the production or sale of a good b. a form of government regulation c. a government payment to support a business or market d. illustrated by the market supply curve

A market is in equilibrium when a. quantity demanded is greater than quantity supplied b. quantity supplied and quantity demanded are equal c. quantity supplied is greater than quantity demanded d. the government takes action to bring it into equilibrium

A market is in equilibrium when quantity supplied equals quantity demanded.

Disequilibrium occurs when: a. quantity supplied and quantity demanded are not equal b. prices are higher than quantity supplied c. quantity supplied is greater than quantity demanded d. there is neither excess supply nor excess demand

Disequilibrium occurs when quantity supplied and quantity demanded are not equal

when there is extra supply (surplus) Prices tend to fall….think clearance sales

Which statement explains why prices rise in a market? a. producers produce a quantity greater than consumers want to buy b. new producers enter the market c. consumers buy much less of a good than they have in previous years d. there is excess demand in the market

Prices might rise if there is excessive demand

When does a surplus exist? a. when new products are brought to the market for sale c. when there are too few items for hte people who want to buy them b. whenever the prices drop d. when there is a greater supply of a good than people want to buy

Surplus Supply is greater than demand

Which of the following is an example of a shortage? a. stores cannot sell all the new popular toys they have on hand b. consumers cannot find enough of a popular new toy in stores c.manufacturers make too many units of a popular new toy d. consumers cannot afford to buy a new popular toy

shortage Demand is greater than supply

How are goods and services distributed in a free market economy? a. through rationing b. through government action c. through prices d. through disequilibrium

How are goods and services distributed in a free market economy? Through prices

Rationing is a common form of distribution in a. centrally planned economy b. price-based system c. free market economy d. market based on competition

Rationing is common in centrally planned economies

If there is a shortage in the market, the price is likely to a. increase c. decrease b. remain the same d. fluctuate

Price ceilings that are set artificially low are likely to create a a. price floor c. equilibrium b. surplus d. shortage

Know the difference between a change in demand and a change in quantity demanded Difference between change in supply and change in quantity supplied