ECON Chapter 3

When there is an excess quantity of a product supplied, there will be

• a tendency for price of the product to increase.

• a tendency for price of the product to fall.

• upward pressure on the price of labor.

  
  

• incentives for consumers to leave the market.

  
  

Which of the following statements is FALSE?

• An increase in income causes a decrease in the demand for an inferior good.

  
  

• A decrease in income causes the demand curve for a normal good to shift to the left.

  
  

• An increase in income causes the demand curve for an inferior good to shift to the right.

• An increase in income causes an increase in the demand for a normal good.

  
  

A shortage creates a situation that forces prices to ________ while a surplus creates a situation that forces prices to ________.

• increase; decrease

• increase; increase

  
  

• decrease; increase

  
  

• decrease; decrease

  
  

An expected future increase in the price of bananas may

• increase the supply of bananas now.

  
  

• decrease the demand for bananas now.

  
  

• make bananas an inferior good.

  
  

• increase the demand for bananas now.

Flour is an input used to produce bread. Suppose that the price of flour rises. As a result

• the supply curve for flour will shift to the right.

  
  

• the supply curve for bread will shift to the left.

  
  

• the supply curve for bread will shift to the right.

• the supply curve for flour will shift to the left.

  
  

What happens as the result of a surplus?

• There is upward pressure on prices.

  
  

• Consumers begin to view the good as an inferior good because it is too commonplace. 

  
  

• Demand for the good increases.

  
  

• There is downward pressure on prices. 

Assume that soda and bottled water are substitutes. Given a downward-sloping demand curve for bottled water, an increase in the price of bottled water will cause

• a leftward shift of the demand curve for bottled water.

  
  

• a decrease in the demand for soda.

  
  

• an increase in the demand for soda.

• a leftward shift in the demand for soda.

  
  

Which of the following is a determinant of market demand?

• taxes imposed on firms that sell the product 

  
  

• number of firms that produce the product

  
  

• cost of inputs used to produce the product

  
  

• consumers' expectation of the future relative price of a product

Fashion trends are a nonprice determinant for demand because

• they cause a movement along the demand curve.

  
  

• they do not affect demand.

  
  

• they change the supply of accessories.

  
  

• they influence people's tastes and preferences in clothing.

When there is a shortage
I.    there is a tendency for price to increase.
II.    there is an excess quantity demanded.

• neither I nor II

• both I and II

• II only

  
  

• neither I nor II