Where Prices Come From

Question 1

Technology- New technology might make it more profitable to produce more goods for the same cost, creating more supply and shifting the graph the the

Answer 1

Right

Question 2

If, in the market for oranges, the supply has increased then That will shift the supply curve to the

Answer 2

Right

Question 3

The income effect of a price change refers to the impact of a change in

Answer 3

demand when income changes.

Question 4

What happens to Equilibrium price and Equilibrium quantity in this scenario?

Answer 4

Equilibrium quantity decreases, Equilibrium price increases, decreases or is unchanged.

Question 5

In October, market analysts predict that the price of platinum will fall in November. What happens in the platinum market in October, holding everything else constant? -We The supply curve shifts to the left. -The supply curve shifts to the right. -The demand curve shifts to the right. -The quantity demanded and the quantity supplied of platinum increase.

Answer 5

The supply curve shifts to the right

Question 6

The change in the quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods that are substitutes is known as the:

Answer 6

The Substitution effect

Question 7

As the price for apples increases the demand for bananas __________ because they are a __________.

Answer 7

As the price for apples increases the demand for bananas increase because they are a Substitute

Question 8

What happens to Equilibrium price and Equilibrium quantity in this scenario?

Answer 8

Equilibrium price increases and Equilibrium quantity decreases.

Question 9

What happens to Equilibrium price and Equilibrium quantity in this scenario?

Answer 9

Equilibrium price decreases and Equilibrium quantity decreases

Question 10

Smart Watches

Apple launches its Apple Watch. As a result, the supply of smart watches increases. What conclusion can we draw about smart watches using this graph?

Answer 10

We can predict that price will fall and quantity traded will rise.

Question 11

When the price of a good falls, two effects take place:

Answer 11

1. Consumers substitute toward the newly less-expensive good. 2. Consumers have more purchasing power, which is like an increase in income.

Question 12

A Market in perfect competition makes these assumptions:

Answer 12

-All goods supplied by all sellers are identical -There is Free entry into the market- any seller can start selling -Perfect information- all buyers and sellers have identical information

Question 13

Equilibrium is the point where supply and demand curve —–.

Answer 13

Meet

Question 14

In the market for electric guitars, there’s an increase in the number of teenagers, an age group known for playing guitars. As a result:

Answer 14

There’s an increase in demand

Question 15

This represents what?

Answer 15

A Decrease in Demand

Question 16

The law of demand implies, holding everything else constant, that:

Answer 16

as the price increases, the quantity demanded will decrease.

Question 17

What are the variables that cause a shift in demand?

Answer 17

1. Income 2. Price of related goods 3. Tastes and preferences 4. Population and demographics 5. Expectation that prices will change or expectation of scarcity.

Question 18

The Substitution effect

Answer 18

The change in the quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods that are substitutes is known as the

Question 19

Substitutes are:

Answer 19

Goods people buy instead of the subject (apples vs bananas)

Question 20

When the price a seller can sell a good goes up, the ________________ goes up.

Answer 20

Quantity supplied

Question 21

The change in the quantity demanded of a good that results from the effect of a change in the good’s price on a consumers’ purchasing power is known as the:

Answer 21

The Income effect

Question 22

Number of firms: an increase of the number of producers of split pea soup will lead to an overall increase of split pea soup supplied, shifting the supply curve to the:

Answer 22

Right

Question 23

In figure 1, a move from D to C would be described as:

Answer 23

A decrease in demand and a decrease in quantity supplied

Question 24

An increase in the price of pineapples will result in: -a decrease in the demand for pineapples. -an increase in the supply of pineapples. -a smaller quantity of pineapples supplied. -a larger quantity of pineapples supplied.

Answer 24

a larger quantity of pineapples supplied.

Question 25

\_\_\_\_\_\_ effects Quantity Demanded.

Answer 25

Price

Question 26

A change in all of the following variables will change the market demand for a product except: - income. -population and demographics. -the price of the product. -tastes.

Answer 26

-the price of the product.

Question 27

Shortage is the difference between:

Answer 27

the quantity demanded and the quantity supplied. Subtract Qs from Qd.

Question 28

From 2006 to 2013, the price of Blu-ray players fell from about $800 to about $95, while the number of Blu-ray players traded increased dramatically. What best explains this change? a. Increase in demand b. Decrease in demand c. Increase in supply d. Decrease in supply Can you show this change on a supply-and-demand diagram?

Answer 28

Supply increased as additional firms started manufacturing Blu-ray players and input costs fell.

Question 29

Demand is the relationship between:

Answer 29

the price and the quantity demanded

Question 30

Economic Theory There’s an excess of demand over supply. Economic theory predicts:

Answer 30

Price will rise

Question 31

\_\_\_\_\_\_ effects Quantity Supplied.

Answer 31

Price

Question 32

Ice cream example: Say the cost of milk goes up (the input cost increases). The cost to produce ice cream has increased, causing a shift in the supply curve to shift to the left. Now the amount supplied is less than the amount demanded, causing a shortage. What conclusions can we draw?

Answer 32

The price of ice cream is increased which leads to the demand of ice cream decreasing and a new equilibrium is created.

Question 33

Variable that effect demand curve: Substitution effect- how people:

Answer 33

exchange purchases to get more for the budget.

Question 34

In figure 1, a move from C to A, would be described as:

Answer 34

An increase in quantity demanded and an increase in supply

Question 35

Price of a an alternative in production: say you make split pea soup, and you can make chicken soup instead. If chicken soup becomes more profitable to make, so you start making more chicken noodle soup and less split pea. This would cause a drop in the ____________ of split pea soup. ( the graph would shift to the left)

Answer 35

Supply

Question 36

Cost of input- if the cost of producing a good decreases, supply will natural increase but the price a seller is willing to sell may not, shifting the graph to the

Answer 36

Right

Question 37

Suppose an increase in supply occurs. We now know: Equilibrium quantity will increase, and Equilibrium price will decrease. It is tempting to believe the decrease in price will cause an increase in demand. But this is incorrect. draw a demand curve to explain why?

Answer 37

The decrease in price will cause a movement along the demand curve, but not an increase in demand. Why? The demand curve already describes how much of the good consumers want to buy, at any given price. When the price change occurs, we just look at the demand curve to see what happens to how much consumers want to buy.

Question 38

If prices change we move along the curve. If other variables change, there will be a \_\_\_\_\_\_in the curve itself.

Answer 38

Shift

Question 39

What happens to Equilibrium price and Equilibrium quantity in this scenario?

Answer 39

Equilibrium quantity increases decreases or remains unchanged, Equilibrium price increases.

Question 40

As the demand curve shifts, the ______________ will change, even if the price doesn’t change.

Answer 40

As the demand curve shifts, the quantity demanded will change, even if the price doesn’t change. The quantity demanded changes at every possible price.

Question 41

An increase in consumer incomes might cause the demand curve to shift to the right, causing a shortage in supply. As a result, consumers might be willing to pay a higher price for a good crafting a new \_\_\_\_\_\_\_\_\_\_.

Answer 41

a new equilibrium.

Question 42

In figure 1, if this is the market for Apple I-Pods, a normal good, what could cause a movement from D to C? a. An increase in the price of electronic components b. A decrease in the price of I-Tunes c. Sony begins to produce and sell their Sony-Pod d. An increase in income e. A decrease in the price of non-Apple MP3 players

Question 43

An increase in income means consumers __________ increases

Answer 43

buying power

Question 44

Suppose incomes increase. What happens to the equilibrium in the smartwatch market? Smartwatches are a normal good, so as income rises demand \_\_\_\_\_\_\_\_\_\_\_\_\_ Equilibrium price \_\_\_\_\_\_\_\_\_\_\_\_\_ Equilibrium quantity \_\_\_\_\_\_\_\_\_\_\_\_

Answer 44

so as income rises, demand shifts to the right Equilibrium price increases Equilibrium quantity increases

Question 45

What is the difference between an"increase in supply" and an "increase in quantity supplied"?

Answer 45

An "increase in supply" means the supply curve has shifted to the right while an "increase in quantity supplied" refers to a movement along a given supply curve in response to an increase in price.

Question 46

Sellers are called \_\_\_\_\_\_.

Answer 46

Sellers are called Supply.

Question 47

Expectation of price: If you have a house that you want to sell, and you expect prices to go up, you might not want to sell right now and instead wait for the price to go up. This would cause an overall supply of houses to sell to decrease, shift the supply curve to the

Answer 47

Left.

Question 48

If the price of water was to fall, I might buy more water and less bottles of ice tea, or less juice. If the price of Juice falls I might buy more juice and less water. This is known as the

Answer 48

Substitution effect

Question 49

What happens to Equilibrium price and Equilibrium quantity in this scenario?

Answer 49

Equilibrium price increases and Equilibrium quantity increases

Question 50

What happens to Equilibrium price and Equilibrium quantity in this scenario?

Answer 50

Equilibrium price cecreases and Equilibrium quantity increases.

Question 51

Supply is the relationship between:

Answer 51

Price and Quantity Supplied.

Question 52

Sellers are willing to __________ of a product if it can sell for a higher price

Answer 52

sell more

Question 53

This represents what?

Answer 53

An Increase in Demand

Question 54

Variables that cause a shift in demand Prices of related goods: What are the 2 goods that are related to a product

Answer 54

Substitutes: Goods people buy instead of the subject (apples vs bananas) Complements: Goods people buy along side subject (hot dogs + buns)

Question 55

Variable that effect demand curve: Income effect- the way changing prices effect:

Answer 55

the way changing prices effect a consumers buying power.

Question 56

Demand Curve- as the price goes up the quantity of demanded goes 

Answer 56

Down

Question 57

What happens to Equilibrium price and Equilibrium quantity in this scenario?

Answer 57

Equilibrium quantity increases, decreases or is unchaged. Equilibrium price decreases.

Question 58

In figure 1, a move from C to B would be described as:

Answer 58

An increase in supply and an increase in demand

Question 59

A decrease in supply will result in the a decrease in \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.

Answer 59

Quantity demanded

Question 60

If the market is in equilibrium than there is no reason for prices to....

Answer 60

Prices have no reason to increase or decrease

Question 61

A movement along the demand curve for toothpaste would be caused by: -a change in consumer income. -a change in population. -a change in the price of toothbrushes. -a change in the price of toothpaste.

Answer 61

a change in the price of toothpaste.

Question 62

What is the difference between an "increase in demand" and an "increase in quantity demanded"?

Answer 62

An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve.

Question 63

Complements are:

Answer 63

Goods people buy along side subject (hot dogs + buns)

Question 64

The relationship between price and quality demanded is known as the:

Answer 64

Law of demand

Question 65

Which of the following will shift the demand curve for a good? -an increase in the price of the good -a change in the technology used to produce the good -a decrease in the price of a complementary good -a decrease in the price of the good

Answer 65

a decrease in the price of a complementary good

Question 66

If price is falling, then the market is reacting to:

Answer 66

a potential surplus

Question 67

If an increase in income leads to in an increase in the demand for peanut butter, then peanut butter is a-

Answer 67

Normal Good

Question 68

In the market for electric guitars, the price of accessories (tuners, amps, cases, etc) decreases. As a result:

Answer 68

There’s an increase in demand

Question 69

Suppose an increase in supply occurs. We now know: 1. Equilibrium quantity will \_\_\_\_\_\_\_\_\_\_\_ 2. Equilibrium price will \_\_\_\_\_\_\_\_\_\_\_\_

Answer 69

Equilibrium quantity will increase, and Equilibrium price will decrease.

Question 70

The demand by all the consumers of a given good or service is the ________ for the good or service.

Answer 70

Market Demand

Question 71

In figure 1, if this is the market for Apple I-Pods, a normal good, what could cause a movement from C to A? a. Lower Output Costs b. New Technology c. New factory d. decrease in wages

Answer 71

All of these

Question 72

As the price of hot dog buns goes up, the demand for hot dogs goes ______ because hot dog buns are \_\_\_\_\_\_\_\_\_.

Answer 72

As the price of hot dog buns goes up, the demand for hot dogs goes down because hot dog buns are compliments.

Question 73

Cost of input- if the cost of producing a good increases, supply will natural decrease but the price a seller is willing to sell may not, shifting the graph to the

Answer 73

Left

Question 74

In the market for electric guitars, the wage of guitar makers increase. As a result-

Answer 74

There’s a decrease in supply

Question 75

Which of the following would cause a decrease in the supply of milk? -a decrease in the price of milk -an increase in the number of firms that produce milk -an increase the price of a product that producers sell instead of milk -an increase in the price of cookies (assuming that milk and cookies are complements)

Answer 75

an increase the price of a product that producers sell instead of milk

Question 76

Quantity Demanded is:

Answer 76

The amount of a good or service that people are going to want to buy at a given price. (If the price goes up, quantity demanded goes down)

Question 77

If there’s an increase in the price of a substitute to a good, then theory predicts for that good

Answer 77

price will increase, quantity will increase

Question 78

Price effects:

Answer 78

Quantity Supplied Quantity demanded

Question 79

What happens to Equilibrium price and Equilibrium quantity in this scenario?

Answer 79

Equilibrium quantity increases, Equilibrium price increases, decreases or remains unchanged

Question 80

Variables the effect supply:

Answer 80

1. Cost of input 2. Technology 3. Price of a an alternative in production: 4. Number of firms 5. Expectation of price

Question 81

If an increase in income leads to a decrease in the demand for popcorn, then popcorn is an -

Answer 81

Inferior Good

Question 82

A Surplus is the difference between :

Answer 82

quantity supplied and the Quantity demanded. Subtract Qd from Qs.

Question 83

Variables that cause a shift in demand Income: as incomes go up, people buy ______ even if the price \_\_\_\_\_\_\_\_\_.

Answer 83

Income: as incomes go up, people buy more even if the price doesn’t change.

Question 84

The Income effect

Answer 84

The change in the quantity demanded of a good that results from the effect of a change in the good’s price on a consumers’ purchasing powe

Question 85

In the market for a bag of socks, what happens if the price of cotton falls?

Answer 85

price of a bag of socks will decrease, quantity will increase