Practice Problems

Question 1

If 2 goods are substitutes, a decrease in the $ of one will lead to a(n) ____ in the demand for the other.

If 2 goods are compliments, a decrease in the $ of one will lead to a(n) _____ in the demand for the other.

Answer 1

decrease
(won’t want the substitute bc the main good is cheap)

increase
(if it’s cheaper to buy a car people will spend more money on gas bc the car was so easy to buy)

Question 2

____ in consumer income leads to a decrease in the demand for inferior goods.

increase in consumer income leads to a ____ in the demand for normal goods.

Answer 2

increase (have money so they will buy less cheap products)

increase (can buy expensive alt. now)

Question 3

(ASK???)Which of the following describes what happens in the market for tomatoes if a salmonella outbreak is attributed to tainted tomatoes?

A) supply will decrease and price increases
B) supply will decrease and price decreases
C) demand will decrease and price increases
D) demand will decrease and price decreases

Answer 3

D
less people want the product bc of salmonella and the price goes down?

Question 4

An increase in the number of buyers and a technological advance will cause?

A) demand will increase and supply increases
B) demand will increase and supply decreases
C) demand will decrease and supply increases
D) demand will decrease and supply decreases

Answer 4

A
demand increases (B in TRIBE) because there are more people buying

supply increases (T in TRINE) because tech makes production faster

Question 5

For consumers pears + apples are substitutes, it’s announced dangerous pesticides used on apples damage one’s health. Which of the following market changes occurs in the pear market?

A) supply decreases and demand increases
B) supply increases and demand has no change
C) demand decreases and supply has no change
D) demand increases and supply has no change

Answer 5

D
(T in TRIBE) affects demand
demand increases because people are buying the substitute more since apple’s are unhealthy

Question 6

As the price of gasoline fell in the U.S. during the 1990s, more people bought large cars.
Demand or supply?
effect on equilibrium price?

Answer 6

Demand (more people bought cars)
increases equilibrium price and quanitity

Question 7

Tech innovation in the use of recycled paper lowers the cost of paper production.
Demand or supply?
effect on equilibrium price?

Answer 7

Supply (production of paper)
decreases equilibrium price and increases quanitity

Question 8

Movie-streaming services lower their prices, local movie theaters have more unfilled seats
Demand or supply?
effect on equilibrium price?

Answer 8

Demand (seats in the theater filled by consumers)
decreases equilibrium price and quanitity

Question 9

In a market for cups of coffee the price of coffee beans decreased.
Demand or supply?
affect?

Answer 9

supply (I in TRINE)
increase (beans are cheaper so it costs less to produce more)