ECN 104 Lecture Notes - Lecture 9: Cornbread, Motor Oil, Cheese Spread
6 Jun 2018
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Chapter3Demand,Supply,andMarketEquilibrium
Copyright(c)2010McGraw-HillRyersonlimited Page1
CHAPTER 3
Demand, Supply,and Market Equilibrium
Topic Question numbers
___________________________________________________________________________________________________
3.1 Demand 1-91
Law of demand 1-16
The demand curve 17-18
Market demand 19-24
Determinants of demand 25-26
Changesin demand 27--84
Changes in quantity demanded 85-91
3.2 Supply 92-127
Law of supply 92-96
The supply curve 97-98
Market supply 99-100
Determinants of supply 101-103
Changes in supply 104-120
Changes in quantity supplied 121-127
3.3 Market equilibrium 128-240
Equilibrium price and quantity 128-161
Rationing function of prices 162-167
Efficient allocation 168-176
Changes in supply, demand, and
equilibrium 177-240
3.4 Application: Government-set prices 241-260
Price ceilings 241-254
Price floors 255-260
The Last word 261-262
True/False Questions 263-283
Appendix: Additional examples of supply and demand 284-287
A3.1 Math Appendix to Chapter 3 288-294
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Chapter3Demand,Supply,andMarketEquilibrium
Copyright(c)2010McGraw-HillRyersonLimited Page2
1. Economists use the term "demand" as
A) a particular price-quantity combination on a stable demand curve.
B) the total amount spent on a particular commodity over a stipulated time period.
C) an upsloping line on a graph which relates consumer purchases and product price.
D) a schedule of various combinations of market prices and amounts demanded.
Ans: D Level: Easy Main Topic: 3.1 Demand Page: 49
Subtopic: Law of demand Type: Definition
2. The horizontal axis of a graph which shows a market demand curve indicates the:
A) prices at which various levels of output can be sold.
B) number of consumers who are in the market for this product.
C) various quantities of output at which the market will be cleared.
D) quantities which consumers will be willing and able to buy at various prices.
Ans: D Level: Moderate Main Topic: 3.1 Demand Page: 50
Subtopic: Law of demand Type: Application
3. The law of demand states that:
A) price and quantity demanded are inversely related.
B) the larger the number of buyers in a market, the lower will be product price.
C) price and quantity demanded are directly related.
D) consumers will buy more of a product at high prices than at low prices.
Ans: A Level: Easy Main Topic: 3.1 Demand Page: 50
Subtopic: Law of demand Type: Definition
4. The law of demand is illustrated by a demand curve that is:
A) vertical.
B) horizontal.
C) upward sloping.
D) downward sloping.
Ans: D Level: Easy Main Topic: 3.1 Demand Page: 50
Subtopic: Law of demand Type: Definition
5. When the price of a product increases, a consumer is able to buy less of it with a given
money income. This describes:
A) the cost effect.
B) the inflationary effect.
C) the income effect.
D) the substitution effect.
Ans: C Level: Easy Main Topic: 3.1 Demand Page: 50
Subtopic: Law of demand Type: Definition
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Chapter3Demand,Supply,andMarketEquilibrium
Copyright(c)2010McGraw-HillRyersonLimited Page3
6. "When the price of a product falls, the purchasing power of our money income rises and
thus permits us to purchase more of the product." This statement describes:
A) an inferior good.
B) the rationing function of prices.
C) the substitution effect.
D) the income effect.
Ans: D Level: Easy Main Topic: 3.1 Demand Page: 51
Subtopic: Law of demand Type: Definition
7. As a result of a decrease in the price of hamburger, consumers buy more hamburger and
more T-bone steak. This is an illustration of:
A) irrational consumer behaviour.
B) changing tastes and preferences.
C) the substitution effect.
D) the income effect.
Ans: D Level: Moderate Main Topic: 3.1 Demand Page: 51
Subtopic: Law of demand Type: Application
8. A result of a fall in the price of gasoline, consumers buy more gasoline and take more
driving vacations. This situation is an illustration of:
A) the income effect.
B) the substitution effect.
C) diminishing marginal utility.
D) the rationing function of prices.
Ans: A Level: Moderate MainTopic: 3.1 Demand Page: 51
Subtopic: Law of demand Type: Application
9. An increase in the price of a product will reduce the amount of it purchased because:
A) supply curves are upsloping.
B) the higher price means that real incomes have risen.
C) consumers will substitute other products for the one whose price has risen.
D) consumers substitute relatively high-priced for relatively low-priced products.
Ans: C Level: Easy Main Topic: 3.1 Demand Page: 51
Subtopic: Law of demand Type: Definition
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