An increase in the market supply of beef would result in a(n):
Answer(s): D
Choice "d" is correct. As illustrated above, a shift outward (increase) in supply, increases quantity demanded (Q2) at equilibrium, accompanied by a decline in price. Thus, an increase in the market supply of beef would result in an increase in the quantity of beef demanded. Choices "a" and "b" are incorrect, as seen in the graph above. There is an increase in the quantity of beef demanded and a decrease in the price of beef.Choice "c" is incorrect, because there is no information in the question pertaining to any "shift" in the beef demand curve or in the demand for any complimentary products (e.g., pork).
In competitive markets, an increase in demand for a product causes a(n):
Rule of economic reasoning: "Draw the graph!"Choice "d" is correct. When demand increases and supply has not increased (as implied by the question), suppliers will raise the price of the product and more product will be bought (but the supply curve does not change). Because consumers are demanding more product than is available, they are "willing" to pay a higher price.Choice "a" is incorrect. Although buyers would pay higher prices and purchase more products, the supply "curve" has not changed. Therefore, the quantity supplied remains the same. Choice "b" is incorrect. Because consumer demand has increased (not decreased). Choice "c" is incorrect. An increase in demand has an indeterminate (and irrelevant) impact on the number of buyers. For example, there could be the same number of buyers in the market, but that each demands a higher quality.
Which one of the following statements about supply and demand is true?
Answer(s): C
Choice "c" is correct. If quantity demanded for a product goes up, this drives price up. Additionally, if supply decreases, this will also drive prices up. Therefore, it is a certainty that price will be driven up, given an increase in demand and a decrease in supply.Choice "a" is incorrect. Increased supply will reduce (not increase) prices, assuming demand remains constant.Choice "b" is incorrect. Increased demand will increase price, and increased supply will reduce price. The net impact on price cannot be determined without more facts. Choice "d" is incorrect. Increased demand will increase (not reduce) price, assuming supply remains constant.
The local video store's business increased by 12 percent after the movie theater raised its prices from $6.50 to $7.00. This is an example of:
Answer(s): A
Choice "a" is correct. For substitute goods, as the price of one good goes up, the demand for another, substitute good increases as consumers desire the lower-priced substitute good.Choice "b" is incorrect. Superior goods. Just as the demand for inferior goods declines with an increase in the income level of a consumer, superior goods will experience a spurt in demand as prices are raised.Choice "c" is incorrect. The demands for mutually "complementary goods" fluctuate together (e.g., more cereal purchases are accompanied by an increase in the demand for milk). Choice "d" is incorrect. Independent goods have unrelated demand functions (e.g., bread and vacuum cleaners).
An increase in the price of crude oil will have what affect on the equilibrium price and quantity of gasoline?
Answer(s): B
Choice "b" is correct. Crude oil is an input to the production of gasoline. When the price of an input increases, supply shifts left, causing equilibrium price to rise and equilibrium quantity to fall. Choice "a" is incorrect, since price will rise and quantity will fall.Choice "c" is incorrect, since price will rise.Choice "d" is incorrect, since quantity will fall.
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