Chapter 4

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A demand curve shows how quantity demanded changes as the price changes. It implies tha

everything else that affects demand is assumed to be constant

The law of demand states that

price and quantity demanded are inversely related

The law of demand says that as the price of a good rises,

buyers purchase less, in part because their real income has fallen

Movements along a demand curve are called changes in

quantity demanded

For which of the following would the income effect of a price change be greatest?

air travel to Australia

If pretzels are a normal good, the income effect of a price change means that

as the price of pretzels increases, the real income of individuals who demand pretzels
decreases, so the quantity demanded of pretzels decreases

Which of the following will not shift the demand curve for movie tickets?

a change in the price of movie tickets

If we say that demand has increased, we mean that there has been

a rightward shift of the demand curve

A change in income will

shift the demand curve for candy

If the price of a haircut (a normal good) increases, other things constant, the

quantity demanded of haircuts decreases

As the price of ballpoint pens increases, the demand for felt-tip pens can be expected to decrease. T or F?

False

Which of the following will cause the demand curve for gasoline to shift leftward?

a decrease in the price of bicycle

If the price of vanilla ice cream decreases, it is likely that

demand for chocolate ice cream will decrease

Which of the following will cause the demand curve for a normal good to shift to the right?

an increase in the price of a substitute good

Which of the following is the best example of complements?

film and film processing (developing)

Which of the following statements about gold jewelry and round-trip bus tickets to Bismarck, North Dakota, is
most likely to be correct?

They are unrelated.

Which of the following best defines supply?

the amount of a good that producers are willing and able to sell at each possible price,
other things constant

The market supply curve of a particular product indicates the total quantities

that sellers are willing and able to offer at alternative prices

Which of the following is the reason supply curves typically slope upward?

Opportunity cost of production increases as quantity supplied increases.

An increase in professors' salaries increases the supply of college education. T or F?

False

Recently it has been discovered that lobsters grown on lobster farms can feed on algae, which is a cheaper
lobster food. As a result of this discovery

the supply curve for lobster will shift to the right

Which of the following will increase the supply of vanilla ice cream?

a decrease in the price of milk (an ingredient in ice cream)

An increase in the price of a good normally increases the

demand for its substitutes

Which of the following would cause an increase in the supply of wheat?

a decrease in the price of corn

An increase in the number of producers of a good will

increase the market supply because market supply is the sum of all individual supply
curves

Other things equal, the supply of index cards is likely to be affected by all of the following except one. Which
is the exception

the price of index cards

A surplus of shoes will cause

a decrease in the price of shoes

Suppliers recognize there is a shortage in the market for their product when they notice that

inventories are falling

If a surplus exists in the market for swimwear, an economist would predict that

the price of swimwear at retail outlets will begin to fall

A shortage of textbooks will cause

an increase in the price of textbooks

If people believe that prices are going to be higher in the future then they are today, they will

increase their demand now

Velcro is becoming more and more popular for a variety of uses, including as fasteners for shoes. What should
happen to the equilibrium price and quantity for shoelaces as a result?

Both price and quantity should decrease

In the market for chewing gum, the current price is 50 cents per pack and 100,000 packs are sold. Which of
the following events would lead to a new equilibrium price of 60 cents and quantity of 90,000 packs?

an increase in the price of the ingredients used to make chewing gum

In which of the following situations will the equilibrium price of wheat increase and the change in the
equilibrium quantity of wheat be indeterminate?

if supply declines and demand rises

In which of the following situations will the effect upon the equilibrium price of wheat be indeterminate?

supply decreases and demand decreases

The arrival of Michael Jordan, Larry Bird, and Magic Johnson in the 1980s increased the popularity of pro
basketball. This led to

an increase in the equilibrium quantity of professional basketball

The sum of the individual demands of all consumers in the market is called

market demand

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