Unit 2 Supply and Demand

What is the name we give the unit that purchases goods and services in the output market?

• firms

• households

• financial institutions

• unit elastic

• businesses

The willingness and ability to consume or buy a good at a given price is known as:

• demand

• supply

• equilibrium

• diminishing marginal utility

• elasticity

Which type of good do we demand more of as our income falls?

• luxuries

• normal goods

• inferior goods

• poorly made goods

• we don’t demand more of any good when our income falls

The substitution effect helps you predict that if the price of carrots rises from 50¢ to $1 each, people will:

• buy more carrots

• buy other vegetables

• buy the same number of carrots

• create a shortage of carrots

What impact does an increase in gasoline prices have on SUVs or other big cars?

• increases demand

• decreases demand

• increases supply

• decreases supply

• indeterminate since these are neutral goods

Which of the following is an inferior good?

• luxury car

• fur coats

• ramen noodles

• filet mignon

• both A and C

Goods that go together like fish and tartar sauce are called?

• substitutes

• elastic goods

• inferior goods

• normal goods

• complementary goods

An increase in price of a good will:

• shift the demand curve left

• shift the demand curve right

• increase the quantity demanded

• decrease the quantity demanded

• we don’t know

According to the principle of diminishing marginal utility:

• You will receive more satisfaction from the first sandwich you eat than the fourth one

• You will buy fewer substitutes as supply increases

• As the price of an item declines, you can buy more of it

• Equilibrium price will rise as demand increases

If a laptop is a normal good, what impact will an increased income have on the demand for laptops?

• increase in demand

• decrease in demand

• no change

• indeterminate