Ch.3 - ECON 201 (Part 2)

Demand for one item goes down when the price of another item goes down. These items must be

• substitutes

• complements.

• normal goods.

• inferior goods.

The "law of demand" implies that

• as prices fall, demand increases.

• as prices fall, quantity demanded increases.

• as prices rise, demand increases.

• as prices rise, quantity demanded increases.

Firms are organizations that

• consumer outputs.

• take advantage of the public

• transform resources into products.

• transform outputs into inputs.

A change in the price of a good or service leads to a ________ that leads to a ________.

• change in quantity demanded; movement along the demand curve.

• change in demand; shift in the demand curve

• change in demand; movement along the demand curve.

• change in quantity demanded; shift of the demand curve.

A change in income, preferences, or prices of other goods or services leads to a ________ that causes a ________.

• change in demand; movement along the demand curve.

• change in quantity demanded; shift of the demand curve.

• change in quantity demanded; movement along the demand curve.

• change in demand; shift in the demand curve.

Equilibrium is the condition that exists.

• whenever there is no government intervention in the market.

• when the demand curve intersects the quantity axis.

• when quantity demanded equals, quantity supplied.

• when the demand curve intersects the price axis.

Households are the consuming units of the economy.

• True

• False

"An increase in the price of gasoline will increase the demand for hybrid vehicles." This statement is an example of a positive economic statement.

• True

• False

If coffee and tea are substitutes, then an increase in the price of coffee will result in an increase in the demand for tea.

• True

• False

Inferior goods are also known as substitute goods.

• True

• False