# Ch 3 Sapling

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question
The concept of demand is best described as:
the quantity of a good or service that people want to purchase at different possible prices.
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The basic proposition of the law of demand is that:
as the price of a good increases, buyers want to purchase less.
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In a market economy, there is a(n) _______________ relationship between the price of a good and the amount of that good buyers want to buy.
inverse or negative
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Consider the table below. Assuming the law of demand holds, the cell labeled "?" could be which of the following quantities?
157
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Suppose that the price of an iced coffee falls from \$4.25 to \$3.50. Assuming that the point on the graph below corresponds to the initial price of \$4.25, move the point to a new position on the curve to show the impact of this price change (holding everything else constant).
Lowest point
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Due to increases in hay prices, an input for raising cattle, the price of a gallon of 2% milk increases from \$2.98 to \$3.25.
Quantity Demanded Decreases
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Groupon has a Groupon for \$6 off the price of laser tag.
Quantity Demanded Increases
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Sharp increase in the price of wood causes increases in prices for dressers and desks.
Quantity Demanded Decreases
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Week long special at the grocery store, where pork shoulder is on sale at \$1.99 a pound, down from \$3.99 a pound.
Quantity Demanded Increases
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Buy one get one free special for mp3 albums on Amazon.
Quantity Demanded Increases
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The maximum amount of a product that sellers are willing and able to provide for sale over a relevant range of prices, holding all other factors constant, is called:
supply.
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When the market price of a good increases, the amount that sellers are willing to offer for sale increases. This statement is best described as:
the law of supply.
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The law of supply explains:
the positive relationship between price and quantity supplied.
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The price that results when quantity demanded equals quantity supplied is most correctly called the:
equilibrium price.
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A surplus exists:
when quantity supplied exceeds the quantity demanded.
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Any price > P* creates
a surplus
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Any price < P* creates
a shortage
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What is the equilibrium price per DVD?
\$10
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At a price of \$12 per DVD:
a surplus of 20 DVDs occurs.
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Which phrase do we use to indicate that we are trying to study the relationship between two variables while the values of all other variables are held unchanged?
ceteris paribus
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Why is this restriction so useful in economic analysis?
If every variable is allowed to change, it would be impossible to isolate the impact of one variable on another.
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College students purchase many more energy drinks during finals week than during the rest of the semester.
Shift of the Demand Curve
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Students eat out more often as the federal government increases how much grant money it provides students.
Shift of the Demand Curve
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College students reduce how much detergent they use for each load of laundry in response too higher detergent prices.
Movement Along the Demand Curve
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College students rush and buy discount furniture to take advantage of a one-day sale.
Movement Along the Demand
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Andrew, a college student, loves drinking coffee late at night to study for exams. Having no income, he is used to buying cheap bad tasting coffee, such as Beanlightened, that he needs to grind and brew himself. The coffee tastes putrid but, with enough cream and sugar, Andrew is able to tolerate it. Occasionally, he does go out to Starbucks when he has spare money. After graduation, Andrew gets a job working at a database firm as a programmer. His income is now a healthy \$75,000 a year and he decides he's had enough bad tasting coffee. He ends up buying coffee daily from Starbucks even though it costs significantly more than Beanlightened. 1. In economic terms, Starbucks coffee is a(n) _________ __________, while Beanlightened coffee is a(n) _______ _________. 2. Andrew's demand for Starbucks coffee changed as a result of an increase in his __________.
normal good, inferior good, a change in income
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After discovering that flash steaming tuna first, before using mechanical processes to extract meat, removes more tuna flesh, more cans of tuna hit the shelves at all major grocers.
Shift of the Supply Curve
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Amplitude decides to join the smartphone market.
Shift of the Supply Curve
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Americans put their gold and silver jewelry for sale as a result of rising prices.
Movement Along the Supply Curve
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A local fight club supplies less of its premium quality soap as a result of lower prices.
Movement Along the Supply Curve
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Billy's mom increases his weekly allowance by \$5. As a result, Billy increases the number of apps he downloads on his smartphone. Smartphone apps are a(n):
normal good
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Susan gets a 15 percent performance bonus at work. She can finally stop eating so many frozen pizzas and eat something more tasty. Frozen pizzas are a(n):
inferior good
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Mike is an appliance salesman. Refrigerator sales in his store have fallen and so has his commission. Mike decides to switch from name brand cereal to generic cereal. Generic cereal is a(n):
inferior good
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Hair stylist Molly loses a few of her clients. Molly cuts back on the number of smoothies she buys during the week. Smoothies are a(n):
normal good
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Professor Jones is an oceanographer. She finds that college students eat less sushi when their incomes rise. Sushi is a(n):
inferior good
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Out-N-In, a burger joint with an absurd national following in the U.S. sells more burgers as the price of chicken increases.
Shift of the Demand Curve
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After it earns 1st prize in the spicy category of a ramen tasting competition, college students buy more Lamian brand ramen noodles.
Shift of the Demand Curve
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Last Hope, an energy drink company notices are desperate during finals and change their buying behavior.