Chapter 3: Demand And Supply

Effective demand is based solely on consumers needs and wants. a. True b. False

A demand curve shows the relationship between price and quantity demanded on a graph with quantity on the vertical axis and price on the horizontal axis. a. True b. False

The law of demand states that, other things being equal, more of a good will be bought at a lower price and less of a good will be bought at a higher price. a. True b. False

A demand curve illustrates the __________ relationship between prices and quantity demanded. a. positive b. inverse

Both the slope and shape of a demand curve is the same for all products and services. a. True b. False

In economic terminology, demand refers to ___________. a. the demand curve. b. a specific point on the demand curve. c.the concept of want or need.

The economic term "ceteris paribus" translates as "and so it goes." a. true b. false

Both demand and supply graphs have price on the ________ axis and quantity on the _______ axis. a. vertical; horizontal b. horizontal; vertical

There is always economic pressure in a market for price and quantity to change. a. true b. false

At any price below the equilibrium level, there will be a __________ situation. a. surplus b. shortage

A change in price of a good or service shifts the demand curve for the good or service. a. True b. False

Demand is affected by the following factors (check all that apply): a. changes in income b. changes in population composition c. changing tastes or preferences d. natural disasters e. new technologies f. price g. prices of substitute goods

If demand of a product decreases when income increases, the product is a(n) _______ good. a. inferior b. luxury c. normal

A supply curve is generally upward sloping (from left to right), reflecting a _______ relationship between price and quantity supplied. a. positive b. inverse

The following factors can shift the supply curve (check all that apply): a. changing tastes or preferences b. changes in the price of substitute goods c. changes in prices of factors of production d. government policy e. natural disasters f. new technologies g. weather conditions

A shift in one curve always causes a shift in the other curve. a. True b. False

Price ceilings benefit those who want or need the product or service by decreasing cost (price) and increasing supply. a. True b. False

The minimum wage is an example of a __________. a. price ceiling. b. price floor.

Price floors tend to result in a __________ situation. a. surplus b. shortage

Government subsidies reduce the cost of production and increase supply at every given price, shifting supply to the __________. a. left. b. right. c. not enough information to determine.

Price ceilings generally result in: a. equilibrium. b. excess supply. c. shortages.

At a price below equilibrium, there would be excess _________. a. demand. b. supply.

The amount a seller is paid for a good or service minus the seller's cost is called producer surplus. a. True b. False

Social surplus is _______ at the equilibrium price and quantity. a. largest b. smallest c. not enough information to determine

The loss in social surplus that occurs when the economy produces at an inefficient quantity is called social deficit. a. True b. False