Principle of Supply and Demand

What is wrong with the statement: Demand refers to the willingness of buyers to purchase different quantities of a good at different prices during a specific time period:

• Instead of “demand”, it should be “quantity demanded”

• Instead of “willingness”, it should be “ability”

• Demand refers to the willingness and ability of buyers, not just willingness

• There is nothing wrong with the statement

True or False: As the price of apples rises, the demand for apples falls.

• True

• False

Consider the demand curve for Sedans in the United States. For simplicity, assume that all sedans are identical and sell for the same price. Also, assume that:

The current market price of Sedans is $30,000

Average Household income is $60,000 per year

Price of a gallon of gas is $5 per gallon

Price of a subway ride is $2.50

Suppose the price of a sedan decreased from $30,000 to $25,000.

Q: This would cause a ________________ the demand curve.

Consider the demand curve for Sedans in the United States. For simplicity, assume that all sedans are identical and sell for the same price. Also, assume that:

The current market price of Sedans is $30,000

Average Household income is $60,000 per year

Price of a gallon of gas is $5 per gallon

Price of a subway ride is $2.50

Q:If an increase in average income causes a rightward shift of the demand curve, then you may conclude that sedans are a _____________ good.

If demand ________ increases, and supply is constant, it leads to ________ prices and Higher Quantity.

• Increases, Lower

• Decreases, Lower

• Increases, Higher

• Decreases, Higher

If supply ________ and supply is constant,

it leads to Lower prices and _______ quantity.

• Increases, Lower

• Decreases, Lower

• Increases, Higher

• Decreases, Higher

If Supply Increases and demand is constant, it leads to _______ prices and ___________ prices

• Higher, Lower

• Lower, Lower

• Higher, Higher

• Lower, Higher

If _________ increases and demand is constant,

it leads to higher prices and lower Quantity

• Quantity

• Complements

• Supply

• Quality

If goods are _______________ for each other, a change in the price of one of the goods will lead to a change in the demand for a similar good. What is the missing word?

• Complement

• Substitute

• Competitor

• Companion

what is this graph called