Chapter 3 Test Review

What two factors must be present for consumers to consume and producers to produce at any given price?

(a)  

Describe a realistic example of the law of demand operating in the production of a good or service (change in quantity demanded).

(a)  

Describe a realistic example of the law of supply operating in the production of a good or service (change in quantity supplied).

(a)  

Explain the difference between a change in quantity supplied or demanded and a change in supply or demand.

(a)  

Define equilibrium or market clearing price.

(a)  

Explain and evaluate the price system in a free market economy (10 points – bonus possible).

(a)  

In the cartoon McDonalds would be an example of which of the following?

Which is an example of the law of demand at work?

A restaurant owner has not changed menu prices in a year. One month ago, the owner noticed that sales for all lunch items had fallen by 50 percent. Which of the following most likely caused the demand curve to shift?

A demand curve is accurate only as long as ceteris paribus is true. What does this Latin phrase mean?