Demand, Supply, and Prices Review

Use this diagram to identify which of the following would cause consumers to demand fewer slices of pizza.

• an increase in the supply of pizza slices

• a decrease in the supply of tacos

• an increase in the price of pizza slices

• a decrease in the price of pizza slices

Which of the following BEST restates the point made in the statement below?

"The most famous law in economics, and the one that economists are most sure of, is the law of demand. On this law is built almost the whole edifice of economics." —David Henderson, “Demand,” The Concise Encyclopedia of Economics

• The way markets respond to a change in price is highly predictable.

• The laws of demand and supply are easy to understand.

• Economists rely on laws as much as any other profession.

• Economic theory rests almost entirely on speculation about how consumers behave.

Based on this diagram, which of the following situations reflects the substitution effect resulting from a special sale on Z-Ball brand golf balls?

• The price of Z-Balls increases when the demand for them increases.

• The price of Z-Balls decreases when the demand for them increases.

• Consumers reject the Z-Balls, assuming they are an inferior product.

• Consumers purchase Z-Balls rather than the brand they normally buy.

How many slices of pizza per day would you expect a pizzeria in this market to sell if it were pricing its slices at $3.50?

• 150

• 175

• 200

• 225

Jenna is a plant lover. She could afford to buy a new houseplant every three months. Something happened in Jenna's life that caused her demand curve for plants to shift to the right. Using the graphs below, identify which of the following is the most likely explanation for the result.

• Jenna has decided that she has to sell some of her houseplants.

• Jenna has switched from buying plants to buying knickknacks.

• Jenna now buys a new houseplant every six months.

• Jenna now buys a new houseplant every month.

Which of the following is the likely result of a successful advertising campaign for an electronic game?

• a supply curve that has shifted to the right

• a supply curve that has shifted to the left

• a demand curve that has shifted to the right

• a demand curve that has shifted to the left

A wildfire has put a major lumber producer out of business. How might an economist show one consequence of this in a graph?

• a supply curve that has shifted to the right

• a supply curve that has shifted to the left

• a demand curve that has shifted to the right

• a demand curve that has shifted to the left

A study by the National Bureau of Economic Research (NBER) examined the responsiveness of consumers to changes in gasoline prices. The study determined that elasticity of demand for gasoline ranges from 0.21 to 0.75. According to the NBER study, what will happen if a major supplier of oil cuts production, causing the price of gasoline to increase greatly?

• Gasoline consumption will increase by a large amount.

• Gasoline consumption will increase by a small amount.

• Gasoline consumption will decrease by a large amount.

• Gasoline consumption will decrease by a small amount.

The Larvine family was on a tight budget, but they loved Japanese food. Every Friday, the family of five ate dinner at the only Japanese restaurant in town. A month ago, however, a new owner raised the prices of the family's favorite dishes by 10 percent. The extra cost forced the Larvines to limit their restaurant dinners to once a month.

• It is elastic; a small increase in price resulted in a large decrease in consumption.

• It is unitary elastic; a small increase in price resulted in a small increase in consumption.

• It is unitary elastic; a small increase in price resulted in a small decrease in consumption.

• It is inelastic; a small increase in price resulted in a small decrease in consumption.

Which of the following price / output points would be found on the market supply schedule used to create the market supply curve below?

• $2.00 / 150

• $5.00 / 300

• $5.00 / 3,000

• $2.00 / 2,000