Question 1

Refer to the demand schedule and curve for athletic shoes. If the price of athletic shoes decreases from $$125 to 100$$, what happens to the quantity demanded, and what economic principle does this illustrate?

Accepted Answer

The quantity demanded increases, illustrating the law of demand.

Question 2

Which of the following would cause a shift of the demand curve for bottled water to the right, as shown in the second image?

Accepted Answer

An increase in the population.

Question 3

In the third image, what does the movement from point A to point B represent?

Accepted Answer

A movement along the demand curve due to a change in the price of the good.

Question 4

Suppose a public health campaign (like warning labels on cigarette packages) convinces people to smoke less. What happens to the demand curve for cigarettes?

Accepted Answer

It shifts to the left.

Question 5

Refer to the supply schedule and curve for athletic shoes. If the price increases from $$100 to 125$$, what happens to the quantity supplied, and what economic principle does this illustrate?

Accepted Answer

The quantity supplied increases, illustrating the law of supply.

Question 6

Which of the following would cause the supply curve for shoes to shift to the right, as shown in the sixth image?

Accepted Answer

A decrease in the price of leather, an input for shoes.

Question 7

A farmer switches from using oxen (as in the seventh image) to a modern tractor (as in the eighth image). What is the likely effect on the supply curve for crops?

Accepted Answer

The supply curve shifts to the right due to increased productivity.

Question 8

Refer to the market equilibrium graph (ninth image). At the equilibrium price, which of the following is true?

Accepted Answer

Quantity supplied equals quantity demanded.

Question 9

If the price of bottled water is set above the equilibrium price, as shown in the tenth image, what will occur in the market?

Accepted Answer

A surplus will occur.

Question 10

According to the summary table (last image), if both the demand and supply curves shift to the right, what happens to equilibrium quantity and price?

Accepted Answer

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

Question 11

If the price of a substitute good decreases, what is the likely effect on the demand for the original good?

Accepted Answer

The demand for the original good decreases.

Question 12

Suppose a natural disaster destroys several factories producing bottled water. What is the likely effect on the market for bottled water?

Accepted Answer

The supply curve shifts to the left, increasing equilibrium price.

Question 13

If consumer incomes rise and bottled water is a normal good, what will happen to the demand curve for bottled water?

Accepted Answer

It will shift to the right.

Question 14

If the government imposes a tax on the production of shoes, what is the likely effect on the supply curve?

Accepted Answer

The supply curve shifts to the left.

Question 15

If the price of a complement good (such as hot dog buns for hot dogs) increases, what happens to the demand for hot dogs?

Accepted Answer

The demand for hot dogs decreases.

Question 16

If a firm expects the price of its product to rise in the future, what is its likely response in the current period?

Accepted Answer

Decrease supply now and increase supply in the future.

Question 17

Which of the following best describes the law of supply?

Accepted Answer

As the price of a good rises, the quantity supplied rises, ceteris paribus.

Question 18

If a technological innovation reduces the cost of producing bottled water, what happens to the supply curve and equilibrium price?

Accepted Answer

The supply curve shifts to the right; equilibrium price decreases.

Question 19

If the market price is below the equilibrium price, what will occur in the market?

Accepted Answer

A shortage will occur.

Question 20

Which of the following is NOT a determinant that shifts the demand curve?

Accepted Answer

Technological change.

Study Guide: The Interaction of Demand and Supply in Microeconomics

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