Supply & Demand Review

The law of demand explains that:

• supply of a product goes down as the price goes down.

• demand for a product goes down as the price goes down.

• demand for a product goes up as the prices goes down.

• supply of a product goes down as the price goes down.

What does the law of demand suggest?

• Buyers increase their demand for a product as its price increases.

• Sellers increase their supply of a product as its price increases.

• Sellers increase their supply of a product as its price decreases.

• Buyers increase their demand for a product as its price decreases.

How do supply and demand help determine the price of a product?

• By pressuring sellers to lower prices on products to the point that most buyers can afford to buy them.

• By creating a balance between buyers who want low prices and sellers who want high prices.

• By ensuring that products with a high level of demand will not suffer from the substitution effect.

• By forcing buyers to accept higher prices so that sellers keep a large supply of most products.

The technology associated with the manufacturing computers has advanced tremendously. This change has led to the price of a computer _______ and the quantity ________.

• rising; increasing

• rising; decreasing

• falling; increasing

• falling; decreasing

Which of these statements is TRUE of complementary products?

• An increase in demand for one will cause a decreased demand for the other.

• An increase in the price of one will cause a decrease in the price of the other.

• An increased supply of one product will result in a decreased supply of the other.

• An increase in the demand for one will usually result in an increased demand for the other.

Which statement best describes the law of supply?

• Sellers creates a larger supply of product when its price increases.

• Buyers have a greater demand for a product when its supply increases.

• Sellers decrease their supply of a product when its price increases.

• Buyers have a reduced demand for a product when its supply increases.

Substitute goods are those goods that consumers will buy to replace another good. Many consumers consider pretzels a substitute good for potato chips. Both are salty products that are consumed at the same part of the meal.

Suppose there is a sudden decrease in the supply of potatoes. How would this most likely affect the demand for pretzels?

• The demand for pretzels would decrease, and then increase.

• The demand for pretzels would remain the same.

• The demand for pretzels would decrease.

• The demand for pretzels would increase.

Which development would most likely cause the demand for a product to increase?

• Consumers expect the price to fall in the near future.

• Consumer preferences shift away from the product.

• Consumer demand for a complementary good increases.

• The number of consumers in a market decreases.

A winter freeze destroys 25 percent of a country’s annual orange harvest.

Which statement regarding the country’s orange juice market is MOST accurate?

• The demand for orange juice will increase as the price decreases.

• The supply of orange juice will remain stable as the price decreases.

• The price of orange juice will increase as the supply decreases.

• The price of orange juice will remain the same as the demand increases.

A new tractor allows farmers to harvest their corn faster while using less fuel. The improved efficiency of the engine will save thousands of dollars in fuel costs each year. This technology will allow farmers who use the machinery to increase their supply of corn.

Based on the text, how will improved technology likely affect corn prices?

• It will cause a decrease in the price of corn.

• It will cause an increase in the price of corn.

• It will cause the price of the corn to remain the same.

• It will cause the price of corn to fluctuate more frequently.