Macro Chapter 2

Home

Get App

Create

What is the effect of a decrease in the supply of a product?

It will cause an increase in the price but a decrease in the quantity traded.
What is an inferior product?

It is a product which consumers buy less of as their incomes increase.
What is the term for the effect which a price change has on real income and therefore on the quantity demanded of a product?

Income Effect
What does the term demand refer to?

The amounts that consumers are both willing and able to purchase at various prices.
What is the effect of an increase in the price of resources?
Select one:
a. It will cause a decrease in the quantity supplied.
b. It will cause an increase in demand.
c. It will cause a decrease in demand.
d. It will cause an increase in supply.
e. It will cause a decrease in supply.

E: It will cause a decrease in supply.
If the price of a product does not change immediately, which of the following will cause an initial surplus of a product?
Select one:
a. An increase in the demand or an increase in the supply.
b. A decrease in the demand or a decrease in the supply.
c. An increase in the demand or a decrease in the supply.
d. A decrease in the demand or an increase in the supply.
e. A change in the quantity demanded.

D: A decrease in the demand or an increase in the supply.
Graphically, what is the effect of a decrease in the price of a product?
Select one:
a. A leftward movement on the supply curve.
b. A rightward movement on the supply curve.
c. A leftward shift in the supply curve.
d. A rightward shift in the supply curve.

A: A leftward movement on the supply curve.
Which of the following is explained by the combination of the substitution effect and the income effect?
Select one:
a. Ceteris paribus.
b. Downward sloping demand curves.
c. Market demand.
d. Equilibrium price.

B: Downward slopping demand curves.
What will cause the demand for a normal product to increase?
Select one:
a. The expectation by consumers that future prices will be higher.
b. A decrease in the price of a substitute product.
c. An increase in the price of a complementary product.
d. A decrease in income levels.
e. A decrease in the size of the population.

A: The expectation by consumers that future prices will be higher.
1. An increase in price; A. An increase in the quantity traded;
2. A decrease in price; B. A decrease in the quantity traded;
3. No change in price; C. No change in quantity traded.
What is the effect on a normal product of a decrease in incomes?
Select one:
a. 1 and A.
b. 1 and B.
c. 2 and A.
d. 2 and B.
e. 1 and C.

D: 2 and B
What is the effect on an inferior product of an increase in incomes?
Select one:
a. It will cause an increase in the quantity demanded.
b. It will cause an increase in demand.
c. It will cause a decrease in demand.
d. It will cause an increase in supply.
e. It will cause a decrease in supply.

C: It will cause a decrease in demand.
What are Factors of Production?
- Labour
- Land
- Capital
- Enterprise
What is a Normal Product?

Buy more when income rises, less when income falls.
What is a Substitute Product?
- Similar products can be substituted for each other.
- Increase in the price of one product causes increased demand for the related product.
- Coke & Pepsi
What is a Complimentary Product?
- Tend to be bought together.
- Increase in price of one product causes a decrease in demand for the related product.
- Skis & Ski boots
What is the effect on supply with regards to the Prices of Productive Resources?

If the price of a productive resource increases, firms will supply less.
What is the effect on supply with regards to Business Taxes?

If business taxes rise, firms will supply less.

Author

Chas

338223

Card Set

Macro Chapter 2

Description

Macro Chapter 2

Updated

2018-02-19T05:05:36Z

Show Answers