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 (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 (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

(a)