Purdue University North Central

Economics 210 / 251 / 252

Review Questions - Chapter 3: Supply and Demand

(1) Given a downward-sloping demand curve for product X, if the price of X is reduced from $10 to $8, then, ceteris paribus:

(a) the demand for X will increase.

(b) the quantity demanded of X will increase.

(c) the demand for X will decrease.

(d) the quantity demanded of X will decrease.

(2) The determinant of demand which does not shift the demand curve is:

(a) income.

(b) tastes.

(c) the price of the good itself.

(d) the prices of other goods.

(3) Which of the following is a determinant of supply?

(a) Consumers’ tastes or desires for the good.

(b) Consumers’s income.

(c) The prices of the factors of production.

(d) The prices of competing goods.

(4) Which of the following events would cause a rightward shift in the market-supply curve for automobiles?

(a) A technological improvement that reduces the costs of production.

(b) An increase in wages of auto workers.

(c) An increase in transportation costs to ship automobiles to dealers.

(d) A decrease in the number of sellers.

(5) When demand increases, ceteris paribus, the equilibrium price will also increase because:

(a) a shortage exists at the old equilibrium price.

(b) a surplus exists at the old equilibrium price.

(c) demand is less than supply.

(d) None of the above are true.

Consider Figure 1 in answering Question (6).

Figure 1

(6) If the actual market price were held to $4 per unit in Figure 1:

(a) there would be a surplus of 50 units.

(b) there would be a shortage of 10 units.

(c) there would be a surplus of 40 units.

(d) there would be a shortage of 20 units.

Consider Figure 2 in answering Questions (7) and (8).

Figure 2

Q

S(1)

(7) Which panel of Figure 2 represents the changes in the market for insulation when the price of natural gas rises and the workers who install install insulation get higher wages?

(a) Panel A

(b) Panel B

(c) Panel C

(d) Panel D

(8) Which panel of Figure 2 represents the market for beef when the price of corn (cattle feed) rises, and the government reports that red meat contributes to coronary heart disease?

(a) Panel A

(b) Panel B

(c) Panel C

(d) Panel D

Consider the following table of information to answer Questions (9) and (10)

$4 $3 $2 $1

Buyers

Al’s quantity demanded 2 3 5 6

Betsy’s quantity demanded 2 2 2 2

Casey’s quantity demanded 1 2 3 3

Total Market quantity demanded ___ ___ ___ ___

Sellers

Alice’s quantity supplied 7 5 4 1

Brian’s quantity supplied 9 7 3 1

Connie’s quantity supplied 6 6 3 2

Total Market quantity supplied ___ ___ ___ ___

(9) In the table, if price were $4, the market would:

(a) be at equilibrium because this is the highest price consumers would pay.

(b) experience a shortage of 17 units.

(c) experience a surplus of 17 units.

(d) experience a surplus of 22 units.

(10) In the table, if price were $2, the market would:

(a) be at equilibrium.

(b) experience a shortage of 10 units.

(c) experience a surplus of 10 units.

(d) experience a surplus of 25 units.