# 1 Which of the following situations best demonstrates the law of

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```					Econ1010 Spring 2009 Supply and Demand Practice questions     Ghazalian/Davidson

1. Which of the following situations best demonstrates the law of demand? A) Moviegoers react to an increase in the price of a theater ticket by seeing fewer movies per year. B) Moviegoers see fewer movies per year due to an overall decrease in the quality of newly released motion pictures. C) A drought causes a decrease in the availability of pumpkins, resulting in fewer jack-o-lanterns displayed on Halloween. D) An increase in the number of people writing Economics textbooks results in a decrease in average textbook prices. 2. A) B) C) D) 3. A) B) C) D) According to the law of demand an increase in the price of gasoline will increase the quantity demanded of gasoline, other things constant. decrease the quantity demanded of gasoline, other things constant. increase the demand for gasoline. decrease the demand for gasoline. The distinction between demand and the quantity demanded is best made by saying that demand is represented graphically by a curve and quantity demanded as a point on that curve. the quantity demanded is represented graphically by a curve and demand as a point on that curve. the quantity demanded is in a direct relation with prices, whereas demand is in an inverse relation. the quantity demanded is in an inverse relation with prices, whereas demand is in a direct relation.

Use the following to answer questions 4-5:

Price

D

Price

B C A

Quantity

Quantity

4. Refer to the graphs above. The effect of an increase in price is best shown by which arrow? A) A B) B C) C D) D 5. Refer to the graphs above. If consumers began purchasing more of this product due to a decrease in price, this would be shown by arrow: A) A B) B C) C D) D 6. A) B) C) D)

An increase in the demand for pork is most likely due to an increase in the price of pork relative to other meats. an increase in the price of other meats relative to pork. an increase in the price of pork, assuming all other prices remain the same. a decrease in the price of pork, assuming all other prices remain the same.

Use the following to answer questions 7-8:
Price of each cassette

B A

Price of each cassette

C D D0 D1

Quantity of cassettes per week

Quantity of cassettes per week

7. Refer to the graph above. What arrow shows the effect of an increase in the number of consumers in the market on the demand for cassettes? A) A B) B C) C D) D 8. Refer to the graph above. The effect of an increase in the price of cassettes is best shown by arrow A) A B) B C) C D) D 9. Which of the following would cause quantity demanded to change without changing the demand curve? A) A change in income. C) A change in tastes and preferences. B) A change in the sales price of the good. D) A change in the price of a substitute good. 10. A) B) C) D) To derive a market demand curve from individual demand curves, you take the maximum quantity of each demand curve as the market quantity demanded at each price. sum the curves horizontally, adding quantities demanded at each price. take the demand curve that is the furthest to the right as the market demand curve. multiply the quantities demanded on each demand at each price to find the market quantity demanded at each price. Which statement is not consistent with the law of supply? The more of a good supplied, the higher the price, other things constant. The less of a good supplied, the lower the price, other things constant. Quantity supplied of a good is directly related to the good's price. Quantity supplied of a good is inversely related to the good's price.

11. A) B) C) D)

Use the following to answer questions 12-13:

Price

(A)

Quantity

Price (B)

Quantity

Price

(C)

Quantity

Price

(D)

Quantity

12. Refer to the graphs above. The curve that best demonstrates the law of supply is A) A. B) B. C) C. D) D. 13. Refer to the graphs above. If quantity supplied is a fixed amount that does not vary with price, then the supply curve looks like A) A. B) B. C) C. D) D. 14. A) B) C) D) The supply of leather jackets would be expected to increase as a result of a decrease in the cost of producing leather jackets. an increase in the price of leather jackets. an increase in the popularity of leather jackets. the expectation that the price of leather jackets will rise in the future.

15. An increase in the current price of gold is expected to cause a __________, while the expectation of a future increase in the price of gold is expected to cause a __________. A) movement along the supply of gold curve; rightward shift of the supply of gold curve B) movement along the supply of gold curve; leftward shift of the supply of gold curve C) rightward shift of the supply of gold curve; movement along the supply of gold curve D) leftward shift of the supply of gold curve; movement along the supply of gold curve

Use the following to answer questions 16-18:

Price per unit

A

Price per unit

C D

B

Quantity per unit of time

Quantity per unit of time

16. Refer to the graph above. The arrow which best shows an increase in supply is A) A. B) B. C) C. D) D. 17. Refer to the graph above. The arrow which best captures the impact of a decline in price on quantity supplied is A) A. B) B. C) C. D) D. 18. Assume the graph above reflects the egg market. The arrow which would best capture the impact of cheaper, prefabricated henhouses on the egg market is A) A. B) B. C) C. D) D.

19. A) B) C) D)

If current quantity demanded is 2,000 and current quantity supplied is 1,000, this is an indication that the current price is below the equilibrium price. producers are not responsive to price changes. the current price is above the equilibrium. consumers of this particular item do not buy less of it when its price increases.

20. The more the current price exceeds the equilibrium price A) the greater the resulting shortage will be. C) the greater the resulting surplus will be. B) the smaller the resulting shortage will be. D) the smaller the resulting surplus will be. 21. A) B) C) D) If the price in a market is above its equilibrium level there will be a surplus and downward pressure on price. there will be a surplus and upward pressure on price. there will be a shortage and downward pressure on price. there will be a shortage and upward pressure on price.

Use the following to answer questions 22-24:

Price of eggs per dozen

\$1.50 \$1.20 \$0.90 \$0.60 \$0.30 \$0.00 0 1000 2000 3000 Dozens of eggs per week
D S

22. A) B) C) D) 23. A) B) C) D) 24. A) B) C) D)

Refer to the graph above. At a price of 60 cents per dozen there is a surplus of 2000 dozen eggs per week. the market is in equilibrium there is a shortage of 3000 dozen eggs per week. there is a shortage of 2000 dozen eggs per week. Refer to the graph above. At a price of 90 cents per dozen there is a shortage of 2000 dozen eggs per week. there is a surplus of 2000 dozen eggs per week. quantity demanded is just equal to quantity supplied. there is a shortage of 1000 dozen eggs per week. Refer to the graph above. At a price of \$1.20 per dozen there is a surplus of 2000 dozen eggs per week. there is a surplus of 3000 dozen eggs per week. there is a shortage of 2000 dozen eggs per week. the market is in equilibrium.

Use the following to answer questions 25-27: Price (\$/ kg.) .10 .25 .50 .75 .95 Quantity demanded (kgs.) 30,000 25,000 20,000 15,000 5,000 Quantity supplied (kgs.) 5,000 10,000 20,000 30,000 40,000

25. The table above shows the demand and supply schedules for pork bellies. There is a shortage of 15,000 kilograms at a price of A) \$0.25. B) \$0.50. C) \$0.75. D) \$0.95. 26. The table above shows the demand and supply schedules for pork bellies. Which of the following statements is true? A) There would be a surplus of pork bellies if the price were 50 cents per kilogram. B) There would be a shortage of pork bellies if the price were 50 cents per kilogram. C) There would be a shortage of pork bellies if the price were 25 cents per kilogram. D) There would be a surplus of pork bellies if the price were 25 cents per kilogram. 27. The table above shows the demand and supply schedules for pork bellies. Based on the above table, the equilibrium price of pork bellies is A) \$0.10/kg. B) \$0.25/kg. C) \$0.50/kg. D) \$0.75/kg. Use the following to answer questions 28-33:

Price

S0

Price

S0

D0

D1

D0 D1

(a)

Quantity

(b)

Quantity

Price

S1 S0

Price

S0 S1

D0

D0

(c)

Quantity

(d)

Quantity

28. Refer to the graphs above. The relevant market is corn. The impact of a poor corn harvest on the market for corn would most likely be demonstrated by which graph above? A) A. B) B. C) C. D) D. 29. Refer to the graphs above. The market is computers. Which graph best represents the impact of cheaper memory chips on the computer market? A) A. B) B. C) C. D) D. 30. Refer to the graphs above. The market is fat-free potato chips that contain olestra. Which graph best represents the impact of increased consumer concern about the effects of olestra on long-term health? A) A. B) B. C) C. D) D. 31. Refer to the graphs above. The market is a luxary food. Which graph best represents the impact of an increase in consumer incomes on the market for a luxary food? A) A. B) B. C) C. D) D. 32. Refer to the graphs above. The market is salmon steaks. Which graph best represents the impact of increased concern that salmon is becoming endangered? A) A. B) B. C) C. D) D. Use the following to answer question 33:
S1
B

S0
A

Price

C

D0 D1 Quantity

33. Refer to the graph above. In response to the rise in the price of oil in the 1970s, consumers switched to fuel-efficient cars and set their thermostats lower. This is best reflected by A) a shift in the demand curve for OPEC oil from D0 to D1. B) a shift in the supply curve for OPEC oil from S1 to S0. C) a movement along the original demand curve, D0, from point A to point B. D) a movement along the new supply curve, S1, from point B to point C.

Use the following to answer questions 34-38:

Price

S1 S2

Price

S2 S1

D1 D1 D2 D2

(a)

Quantity

(b)

Quantity

Price

S2 S1

Price

S1 S2

D1

D2

D1 D2

(c)

Quantity

(d)

Quantity

34. Refer to the graphs above. The consequences of improved technology combined with an increase in the number of consumers can best be illustrated by: A) Graph A. B) Graph B. C) Graph C. D) Graph D. 35. Refer to the graphs above. Higher costs of production combined with an expectation on the part of consumers of higher prices in the future would result in the shifts depicted in: A) Graph A. B) Graph B. C) Graph C. D) Graph D. 36. Refer to the graphs above. Suppose the price of a good that is a substitute in both consumption and production for the good depicted in the graph falls. The expected shifts in supply and demand are shown in A) Graph A. B) Graph B. C) Graph C. D) Graph D. 37. Refer to the graphs above. The effect of increased consumer income and higher production costs is most likely shown in A) Graph A. B) Graph B. C) Graph C. D) Graph D. 38. Refer to the graphs above. The Iraq War increased the United States military's recruitment goals. At the same time it made Americans less likely to “volunteer” for military service. This situation is best represented by A) Graph A. B) Graph B. C) Graph C. D) Graph D.

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