Unit 2: How Markets Work

According to the law of demand, price and quantity demanded have a(n) __________ relationship.

Select all of the determinants that will cause an INCREASE in demand for a good:

• Increase in population

• Decrease in consumer income

• Rise in cost of production

• Increase in the demand for a complementary good

• Decrease in the price of a good's substitute

What happens to the supply and demand curves when there is a decrease in quantity?

• Shift right

• Slide

• Shift left

• Nothing happens

Select all of the following statements that are true about goods that have elastic demand:

• Consumers are very sensitive to a change in price

• They have many substitutes

• They are necessities

• Demand will not change regardless of a price change

• They take up a large portion of a person's income

Blood pressure medication has elastic demand because even if the price increases, demand will decrease by much less.

• True

• False

The balance between supply and demand is called

• Equilibrium

• Surplus

• Disequilibrium

• Shortage

As the price of pancakes increases, what will happen to the demand for waffles?

• It will decrease

• It will stay the same

• It will increase

• People will buy both because breakfast is delicious

As the demand for salsa increases, what will happen to the demand for chips?

• It will increase

• It will stay the same

• It will decrease

• Mmm tacos

A good or service a producer is able and willing to make for sale to consumers is called

Mark all of the statements that are true about the law of supply:

• A producer will supply more as prices of goods decrease

• A producer will supply less as the prices of goods decrease

• A producer will supply more as the prices of goods increase

• A producer will supply less as the prices of goods increase