ECON Chapter 3A Review

If the price of potato chips increases, other things being equal, demand for potato-chip dip will:

• not change, only the quantity demanded will change.
• increase, because the goods are substitutes.
• decrease, because the goods are substitutes.
• decrease, because the goods are complements.

Assume that a computer is a normal good. An increase in consumer income, other things being equal, would:

• cause an upward movement along the demand curve for computers.
• cause a downward movement along the demand curve for computers.
• shift the demand curve for computers to the left.
• shift the demand curve for computers to the right.

Assuming that bus travel is an inferior good, a decrease in consumer income, other things being equal, will cause:

• a downward movement along the demand curve for bus travel.
• no change in the demand curve for bus travel.
• an upward movement along the demand curve for air travel.
• a rightward shift in the demand curve for bus travel.

If the price of hot dogs increases, what will happen in the market for potato chips, a complementary good?

• Demand will increase.
• Quantity demanded will increase.
• Demand will decrease.
• Quantity demanded will decrease.

Supply is a relationship between:

• price of a particular good and quantity of this good that buyers are willing to buy.
• cost of a particular good and quantity of this good that sellers are willing to buy.
• price of a particular good and quantity of this good that sellers are willing to sell.
• cost of a particular good and price that buyers are willing to pay.

Consider the following statement: ‘Due to the drought the quantity of water available for consumption reduced dramatically’. This will cause a/an:

• downward movement along the supply curve for water.
• upward movement along the supply curve for water.
• rightward shift in the supply curve for water.
• leftward shift in the supply curve for water.

When the price of a good is above its equilibrium price, a:

• surplus puts upward pressure on the price.
• surplus puts downward pressure on the price.
• shortage puts upward pressure on the price.
• shortage puts downward pressure on the price.

A shortage of a product means a/an:

• excess supply of the product.
• excess demand of the product.
• situation where the quantity demanded is less than the quantity supplied.
• situation where the quantity supplied exceeds the quantity demanded.

Thousands of people leave a small town due to a factory closing down. Sales at the local grocery store are reduced. What causes this change?

• Prices or availability of substitutes

• Prices or availability of complementary goods

• Change in the weather or season

• Change in the number of buyers

Which statement expresses a central idea of how the laws of supply and demand work?

• The government sets the prices for goods and services.

• Prices are determined by the interaction of producers and consumers.

• Consumers alone determine the prices for goods and services.

• Technology dictates the prices charged for goods and services.