TRUE OR FALSE
If the statement is true, skip it. If the statement is false, write a sentance that explains why the statement is false.
1. The "Law of Demand" states that, all other things being constant the demand for a product is inversely related to its price.
2. A demand equation is normally written with price as the dependent variable and quantity demanded as the independent variable.
3. A demand schedule lists the quantities that people will purchase at various possible prices.
4. A change in the quantity demanded is caused by one thing, a change in the price of the product. Everything else will cause a change in demand.
5. If an increase in incomes in Viet Nam results in an increase in the demand for motorbikes, then motorbikes are not "normal goods" in Viet Nam.
6. If an decrease in incomes in the United States results in an increase in the demand for bicycles, then bicycles are "normal goods" in the United States.
7. An increase in expected future prices will increase the quantity demanded but it will not increase the demand.
8. The "Law of Supply" states that, other things being equal, the supply will go to those individuals who are willing to pay the most.
9. A movement along a supply curve is called a change in the quantity supplied.
10. If all other things remain constant, an expected increase in the future price of a product will result in a decrease in the current supply.
11. If all other things remain constant, an increase in the tax on the production of a good will result in an increase in the supply of that good.
12. The equilibrium price is one at which supply equals demand.
13. If the Laws of Supply and Demand are both obeyed we can be sure that the equilibrium in the goods market is a stable one.
14. If the Laws of Supply and Demand are both obeyed and the actual price is below the equilibrium price, there will be a surplus (Excess supply).
15. Comparative static analysis examines how the equilibrium has changed when one or more of the relationships has changed.
16. If the supply of a product increases while the demand for the product decreases, we can be sure that the equilibrium price will rise.
17. In most markets the determinants of supply and demand are constantly changing, hence most markets are in a state of disequilibrium most of the time.
18. When the government sets a maximum price that is below the equilibrium price, there is likely to be a shortage and some method of rationing the limited supply will be needed.
19. When the government sets a minimum price that is above the equilibrium price, there is likely to be an "excess supply" and some way of disposing of the surplus will be needed.
20. The demand for a good is the amount of that good that consumers plan to buy at a particular price.
FILL IN THE BLANKS
1. The "Law of Demand" is based on two economic effects. They are : (1) the substitution effect and (2) the _______________________________ effect.
2. A decrease in the price of computers will cause an ________________________ in the demand for of computer diskettes because computers and diskettes are complements of each other.
3. The _____________________________________ is the amount that producers wish to sell at a particular price.
4. _____________________________________ refers to the entire relationship between the quantity supplied of a product and the price of the product.
5. If all other things remain constant, an increase in the cost of production will result in a ___________________________________ in the supply of a product.
6. ______________________________________ analysis examines the time paths of variables as they move from one equilibrium to the next.
7. If both the supply and demand for a product increase we can be sure that the equilibrium quantity will ________________________________________ .
8. If the supply increases and demand for a product decreases we can be sure that the equilibrium price will ________________________________________ .