Supply and Demand Review

The law and demand says

• the higher the price, the more consumers will buy

• the lower the price, the less consumers will buy

• the lower the price, the more consumers will buy

• the lower the price, the more consumers will substitute

a drop in price will

• increase the demand for goods

• decrease the demand for goods

• not affect the demand for goods

• not affect the law of demand

Which of the following describes the substitution effect?

• as the price of a good falls, people will substitute other products

• as the price of a good rises, people will substitute other products

• as demand rises, people will substitute other products.

• as demand falls, people will substitute other products.

a demand curve illustrates

• the differences in price charged by different stores

• the quantities demanded at each price by consumers

• the differences in demand for different products

• the products which are most in demand

Substitutes are

• goods that are bought and used together

• goods used in place of one another

• goods that cannot be replaced

• goods which cause a shift in the demand curve.

According to the law of supply

• the lower the price the larger the quantity consumed

• the higher the price the larger the quantity produced

• if the price of a good rises some firms will produce less

• if the price of a good falls new firms may enter the market

A market supply curve shows

• the quantity supplied by producers at different prices

• supply for any set of conditions

• how prices affect the cost of raw materials

• how the supply of goods is kept in balance

Which of the following is an example of a variable cost?

• rent

• machinery repair

• equipment

• raw materials

Which of these leads to an increase in supply?

• an increase in the cost of raw materials

• a decrease in the cost of raw materials

• diminishing marginal returns

• a change in the law of supply

A subsidy is

• a tax on the production or a sale of a good

• a government payment to support a business or market

• a form of government regulation

• illustrated by the market supply curve