When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes: Law of Demand
Answer: the income effect Show
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Get faster at matching terms Terms in this set (65)Market explained on the basis of supply and demand assume many buys and many sellers of a standardized product The law of demand states that price and quantity demanded are inversely related Graphically, the market demand curve the horizontal sum of individual demand curves Economists use the term "demand" to refer to a schedule of various combinations of market prices and amounts demanded The relationship between quantity supplied and price is ________ and the relationship between quantity demanded and price is _______ direct, inverse When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes the income effect The income and substitution effects account for the downward sloping demand curve "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 One reason that the quantity of a good demanded increases when its price falls is that the lower price increases the real incomes of buys, enabling them to buy more A recent study found that an increase in the Federal tax on beer (and thus an increase in the price of beer) would reduce the demand for marijuana. We can conclude that beer and marijuana are complementary goods In 2000 the demand for "Razor" two wheel scooters greatly increased. This increase in demand might best be explained by a change in buyer tastes Which of the following will not cause the demand for product K to change a change in the price of K Which of the following would not shift the demand curve for beef a reduction in the price of cattle feed An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction is based on the assumption that bicycles are normal goods A right ward shift in the demand curve for product C might be caused by a decrease in the price of a product that is complementary to C
Video cassette recorders and video cassettes are complementary goods If the demand curve for product B shifts to the right as the price of product A declines, then A and B are complementary goods If the price of product L increases, the demand curve for close-substitute product J will
shift to the right Which of the following is most likely to be an inferior good used clothing Which of the following statements is correct an increase in the price of C will decrease the demand for complementary product D Which of the following will cause the demand curve for product A to shift to the left an increase in money income if A is an inferior good If X is a normal good, a rise in money income will shift the demand curve for X to the right If Z is an inferior good, a decrease in money income will shift the demand curve for Z to the right If the demand for a normal good (for example, steak) shifts to the left, the most likely reason is the consumer incomes have fallen If products C and D are close substitutes, and increase in the price of C will shift the demand curve of D to the right Suppose an excise tax is imposed on product X. We would expect this tax to decrease the demand for complementary good Y and increase the demand for substitute product Z When an economist says that the demand for a product has increased, this means that consumers are now willing to purchase more of this product at each possible price "In the corn market, demand often exceeds supply and supply sometimes exceeds demand. The price of corn rises and falls in response to changes in supply and demand." In which of these two statements are the terms "demand" and "supply" being used correctly? in the second statement By an "increase in demand" we 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 A decrease in the demand for recreational fishing boats might be caused by an increase in the price of outboard motors An "increase in demand" means that the demand curve has shifted to the right Assume that the demand schedule for product C is downsloping. If the price of C falls from $2.00 to $1.75 a larger quantity of C will be demanded An increase in product price will cause quantity demand to decrease The law of supply indicates that producers will offer more of a product at high prices than they will at low prices A leftward shift of a product supply curve might be caused by some firms leaving an industry An improvement in production technology will shift the supply curve to the right
If producers must obtain higher prices than previously to produce various levels of output, the following has occurred a decrease in supply The location of the supply curve of a product depends on all of the above 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 increase the supply of B and increase the demand for C A market is in equilibrium if the amount producers want to sell is equal to the amount consumers want to buy If the demand and supply curves for product X are stable, a government-mandated increase in the price of X will increase the quantity supplied and decrease the quantity demanded of X The rationing function of prices refers to the capacity of a competitive market to equate the quantity demanded and the quantity supplied If there is a shortage of product X the price of the product will rise At the current price there is a shortage of a product. We would expect price to increase, quantity demanded to decrease, and quantity supplied to increase A surplus of a product will arise when price is above equilibrium with the result that quantity supplied exceeds quantity demanded If price is above equilibrium level, competition among sellers to reduce the resulting surplus will increase quantity demanded and decrease quantity supplied 57) Assume in a competitive market that price is initially below the equilibrium level. We can predict that price will increase, quantity demanded will decrease, and quantity supplied will increase Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity? an increase in supply Suppose in each of four successive years producers sell more of their product and at lower prices. This could be explained in terms of stable demand curve and increasing supply In which of the following instances will the effect on equilibrium price be dependent on the magnitude of the shift in supply and demand demand rises and supply rises 64) If the supply and demand curves for a product both decrease, then equilibrium quantity must decline, but equilibrium price may either rise, fall, or remain unchanged If the supply of a product decreases and the demand for the product simultaneously increases, then equilibrium price must rise, but equilibrium quantity may either rise, fall , or remain unchanged Refer to the above, An increase in income, if X is a normal good, will increase D, increase P, and increase Q An increase in the price of a product that is a close substitute for X will increase D, increase P, and increase Q A decrease in the number of consumers of product X will decrease D, increase P, and decrease Q An increase in the tastes and preferences for X will increase D, increase P, and increase Q An increase in the prices of resources used to produce X will decrease S, increase P, and decrease Q An improvement in the technology used to produce X will increase S, decrease P, and increase Q A reduction in the number of firms producing X will decrease S, increase P, and decrease Q Which of the above diagrams illustrates the effect of an increase in automobile worker wages on the market for automobiles D only Effect of a decline in the price of personal computers on the market for software A only Increase in the price of Bud on the market for Coors A only Decrease in incomes on the market for secondhand clothing A only 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 Recommended textbook solutions
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QUESTION If your nominal wage doubles at the same time as prices double, your real wage will A. increase. B. decrease C. not change. D. double. E. be impossible to determine. Verified answer Other Quizlet setsGovernment Unit 119 terms alysonnicolederrick Respiratory p212 terms NathanielR97 State and Local Government Final90 terms Stand_Louisiana Mechanical vent Ch 2 & 4 quiz10 terms HunterxHunter19PLUS Related questionsQUESTION In Exhibit 8-6, if this firm is currently producing 20 units of output, this firm: 6 answers QUESTION if a perfectly competitive from is producing an output rate at which marginal cost is greater than price, the firm should 2 answers QUESTION Constant relative risk aversion implies that... 3 answers QUESTION Suppose an economy produces only two goods, computers and TVs. If the economy operates at a point on its production possibilities curve, it can produce more computers only if 15 answers What happens when the price of a product increases?An increase in price almost always leads to an increase in the quantity supplied of that good or service, while a decrease in price will decrease the quantity supplied.
What happens when consumers react to an increase in a goods price?The substitution effect occurs when consumers react to an increase in a good's price by consuming less of that good and more of other goods.
Why do consumers buy less of an item when its price rises?Supply is generally considered to slope upward: as the price rises, suppliers are willing to produce more. Demand is generally considered to slope downward: at higher prices, consumers buy less.
When the price of a product increases there is quizlet?as the price of a product increases, quantity demanded lowers; likewise, as the price of a product decreases, quantity demanded increases.
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When the price of a product increases a consumer is able to buy less of it with a given money income this describes the?
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