Law of Supply and Demand

Thousands of people leave a small town due to a factory closing down.  Sales at the local grocery store become slow. What causes this change?

• Prices or availability of substitutes
• Prices or availability of complementary goods
• Change in the weather or season
• Change in the number of buyers

New technology advances the rate at which furniture can be assembled. Why does this change the supply?

• Change in cost of production
• Changes in number of producers
• Changes in expectations

The market equilibrium price is the price at which

• surpluses depress the number of goods supplied
• shortages and surpluses will have no effect on the market
• the government will not intervene in the market
• the quantity demanded is the same as the quantity supplied

What is the Equilibrium Price?

• 1
• 2
• 3
• 4

When there is a shortage the price will usually? 

• rise
• fall
• remain the same
• equilibrium

Goods that are bought and used together are 

• complementary goods
• substitute goods
• income goods
• unrelated goods

Which of the following is likely to increase the demand for peanut butter?

• Fewer children in the population
• News that insects have destroyed much of the peanut crop and that there will be less peanut butter on the shelves in three months.
• A big increase in the price of jelly.
• A report from the Surgeon General of the United States that eating peanut butter makes people nutty.

The diagram represents a

• increase in demand
• decrease in demand
• change in quantity demand
• none of the above

The Law of Demand says that price and quantity have a(n)

• direct relationship
• inverse relationship
• marginal utility
• diminishing utility

Inferior goods react ___________ to income shifts.

• directly
• sometimes
• constantly
• inverse