ECONOMICS - DEMAND AND SUPPLY

The law of demand states that, other things remaining the same, the higher the price of a good, the

• smaller is the demand for the good.

• smaller is the quantity of the good demanded

• larger is the quantity of the good demanded.

• larger is the demand for the good.

A drop in the price of a compact disc shifts the demand curve for prerecorded tapes leftward. From that you know compact discs and prerecorded tapes are

• normal goods.

• substitutes.

• inferior goods.

• complements.

A substitute is a good

• of higher quality than another good.

• that is not used in place of another good.

• that can be used in place of another good.

• of lower quality than another good.

People buy more of good 1 when the price of good 2 rises. These goods are

• normal goods.

• complements.

• substitutes.

• inferior goods.

Which of the following pairs of goods are most likely substitutes?

• compact discs and compact disc players

• lettuce and salad dressing

• cola and lemon lime soda

• peanut butter and gasoline

The demand for a good increases when the price of a substitute ________ and also increases when the price of a complement ________.

• falls; falls

• rises; falls

• rises; rises

• falls; rises

A complement is a good

• used in conjunction with another good.

• used instead of another good.

• of lower quality than another good.

• of higher quality than another good.

The demand curve for a normal good shifts leftward if income ________ or the expected future price ________.

• decreases; falls

• increases; rises

• increases; falls

• decreases; rises

If income increases or the price of a complement falls,

• the supply curve of a normal good shifts leftward.

• the supply curve of a normal good shifts rightward

• the demand curve for a normal good shifts rightward.

• the demand curve for a normal good shifts leftward.

If income decreases or the price of a complement rises,

• there is an upward movement along the demand curve for the good

• there is a downward movement along the demand curve for the good.

• the demand curve for a normal good shifts leftward

• the demand curve for a normal good shifts rightward.