Macroeconomics Chapter 3

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Graphically, the market demand curve is

the horizontal sum of individual demand curves

The relationship between quantity supplied and price is _____ and the relationship between quantity demanded and price is ____.

direct, inverse

An increase in the price of a product will reduce the amount of it purchased because:

consumers will substitute other products for the one whose price has risen.

When the price of a product rises, consumers shift their purchases to other products whose prices are now relatively lower. This statement describes:

the substitution effect.

When the price of Nike soccer balls fell, Ronaldo purchased more Nike soccer balls and fewer Adidas soccer balls. Which of the following best explains Ronaldo’s decision to buy more Nike soccer balls?

the substitution effect.

An increase in the price of product A will:

increase the demand for substitute product B.

Which of the following would most likely increase the demand for gasoline?

the expectation by consumers that gasoline prices will be higher in the future.

By an "increase in demand" economists mean that:

the quantity demanded at each price in a set of prices is greater.

The term "quantity demanded":

refers to the amount of a product that will be purchased at some specific price.

An increase in the quantity demanded means that:

price has declined and consumers therefore want to purchase more of the product.

In moving along a demand curve which of the following is not held constant?

the price of the product for which the demand curve is relevant.

In which of the following statements are the terms "demand" and "quantity demanded" used correctly?

When the price of ice cream rose, the quantity demanded of ice cream fell, and the demand for ice cream toppings fell.

Increasing marginal cost of production explains:

why the supply curve is upsloping.

Assume product A is an input in the production of product B. In turn product B is a complement to product C. We can expect a decrease in the price of A to:

increase the supply of B and increase the demand for C.

Suppose product X is an input in the production of product Y. Product Y in turn is a substitute for product Z. An increase in the price of X can be expected to:

increase the demand for Z.

Other things equal, if the price of a key resource used to produce product X falls, the:

product supply curve of X will shift to the right.

If price is above the equilibrium level, competition among sellers to reduce the resulting:

surplus will increase quantity demanded and decrease quantity supplied.

With a downsloping demand curve and an upsloping supply curve for a product, a decrease in resource prices will:

decrease equilibrium price and increase equilibrium quantity.

Price floors and ceiling prices:

interfere with the rationing function of prices.

An effective price floor on wheat will:

result in a surplus of wheat.

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