Basic Analysis of Demand and Supply

The supply curve shows the

relationship of quantity and price demanded

• False

• True

Excise taxes can be used to generate revenue to the government, but also to alter the behavior of consumers and discourage consumption of certain products.

• TRUE

• FALSE

Assume that the production of corn and wheat utilize the same resources (substitutes in production). If the price of corn increases, then we can expect the price of wheat to also increase, all else held constant.

• TRUE

• FALSE

An upward slopped supply curve is consistent with the law of supply.

• TRUE

• FALSE

A market can be defined as an institutional arrangement under which buyers and sellers can exchange goods and services for a mutually agreeable price

• TRUE

• FALSE

The Law of Demand helps to explain

social behavior.

• TRUE

• FALSE

An increase in the price of a product will reduce the amount of it purchased because:

• Supply curves are upsloping

• The higher price means that real incomes have risen.

• Consumers will substitute other products for the one whose price has risen

• Consumers substitute relatively high-priced for relatively low-priced products.

Operating system software such as Windows is a complement product to computer processors. If the price of computer processors declines, then we should expect the demand for operating system software to decrease.

• TRUE

• FALSE

A given supply curve assumes that input prices, production technology, and any other relevant factors except the price of the product, are held constant

• TRUE

• FALSE

Car manufactures use many commodities in their production process. If

prices of those commodities increase, then we should expect the supply curve

to shift downwards (to the right).

• TRUE

• FALSE