Quiz 1 - Introduction to Microeconomics

Typically, what main economic factor(s) affect demand?

• Price is the overriding factor

• Multiple factors including price and income.

• Demographic and population shifts.

• Primarily growth in consumer income.

• Advertising is the overriding factor.

Answer explanation

Demand is influenced by multiple factors, primarily price and consumer income. While price is crucial, income levels also significantly impact purchasing power and demand, making the correct choice 'Multiple factors including price and income.'

If the price of a substitute good increases significantly, demand for the competing good will:

• Decrease

• Increase or decrease, depending on the difference between the two prices.

• Remain unchanged.

• Increase

• The effect is uncertain. It depends on the price elasticity of demand.

Answer explanation

The effect on demand is uncertain and depends on price elasticity. However, if demand is elastic, an increase in price typically leads to a decrease in quantity demanded, making 'Increase' the correct choice in this context.

Which of the following pairs of goods are complements?

• Airline seats and train seats.

• Coffee and soft drinks.

• Coffee and sugar.

• Coffee and tea.

• Hot dogs and hamburgers.

Answer explanation

Coffee and sugar are complements because sugar is often added to coffee to enhance its flavor, making them typically consumed together. The other pairs do not have this direct complementary relationship.

Which of the following demonstrates the law of demand?

• Dave buys more donuts at $0.25 per donut than at $0.50 per donut, other things equal.

• After Jon got a raise at work, he bought more pretzels at $1.50 per pretzel than he did before his raise.

• Kendra buys fewer Snickers at $0.60 per Snickers after the price of Milky Ways falls to $0.50 per Milky Way.

• Melissa buys fewer muffins at $0.75 per muffin than at $1 per muffin, other things equal.

Answer explanation

Dave's choice illustrates the law of demand, which states that as the price of a good decreases, the quantity demanded increases, shown by him buying more donuts at $0.25 than at $0.50.

What happens when the price of a complementary good has decreased?

• the costs incurred by sellers producing the good have decreased.

• the number of buyers in the market has decreased

• income has increased, and the good is an inferior good.

• the price of a complementary good has decreased.

Answer explanation

When the price of a complementary good decreases, it typically leads to an increase in demand for the related good, as consumers are more likely to purchase both together. Thus, the correct answer is that the price of a complementary good has decreased.

What happens to the demand curve when the price remains constant?

• remains constant, but we observe a movement downward and to the right along the demand curve.

• remains constant, but we observe a movement upward and to the left along the demand curve.

• increases.

• decreases

Answer explanation

When the price remains constant, the quantity demanded can increase due to factors like consumer preferences or income changes, leading to a rightward shift in the demand curve, indicating an increase in demand.

What results in a movement upward and to the right along a fixed supply curve?

• results in a movement upward and to the right along a fixed supply curve.

• results in a movement downward and to the left along a fixed supply curve.

• shifts the supply curve to the right.

• shifts the supply curve to the left.

Answer explanation

A movement upward and to the right along a fixed supply curve indicates an increase in price, leading to a higher quantity supplied. This is consistent with the law of supply, where higher prices incentivize more production.

What happens when ketchup prices rose?

• When ketchup prices rose, ketchup sellers increased their quantity supplied of ketchup.

• When sweater producers expected sweater prices to rise in the near future, they decreased their current supply of sweaters.

• When quantity demanded has increased at every price, it might be because

• The University of Iowa was voted the #1 'party school' in 2013. The University of Iowa is located in Iowa City.

Answer explanation

When ketchup prices rose, sellers responded by increasing the quantity supplied to take advantage of higher prices, which is a basic principle of supply in economics.

Which of the following demonstrates the law of supply?

• When leather became more expensive, belt producers decreased their supply of belts.

• When car production technology improved, car producers increased their supply of cars.

Answer explanation

The correct choice illustrates the law of supply, which states that as production technology improves, producers can increase supply. In this case, improved car production technology led to an increase in car supply.

What happens when the price of stand-up paddle boards changes?

• does not shift when the price of stand-up paddle boards changes because the price of stand-up paddle boards is measured on the vertical axis of the graph.

• does not shift when the price of stand-up paddle boards changes because the price of stand-up paddle boards is measured on the horizontal axis of the graph.

• shifts when the price of stand-up paddle boards changes because the price of stand-up paddle boards is measured on the vertical axis of the graph.

• shifts when the price of stand-up paddle boards changes because the quantity supplied of stand-up paddle boards is measured on the horizontal axis of the graph.

Answer explanation

The correct choice states that the supply curve does not shift when the price changes, as price is on the vertical axis. Changes in price lead to movements along the curve, not shifts of the curve itself.