FINANCE

n economics, the term demand refers to the quantity of a good that people A) would like to consume on a given date. B) are willing and able to buy at a particular price on a given date. C) are willing and able to buy at all possible prices. D) would like to have available during a given time period. E) none of the above 2. In economics, the term supply refers to A) the quantity of a good or service a producer must sell to earn a profit. B) the quantity of a product that people want to buy. C) the quantity of an item offered for sale at a particular price. D) the quantity of a good or service producers will sell at all possible prices. E) none of the above 3. When buyers will purchase exactly as much as sellers are willing to sell, what is the condition that has been reached? A) supply and demand B) excess demand C) equilibrium price D) price floor E) none of the above 4. When there is an increase in supply, what is the probable result in the market? A) equilibrium would settle at a higher price and a lower quantity B) equilibrium would settle at a lower price and a higher quantity C) equilibrium would settle at a lower price and a lower quantity D) equilibrium would not change E) none of the above 5. In a market economy, who is it that ultimately determines the demand for a product or service? A) the producers who create the product or service B) the government C) those who buy the product or service D) those who supply the raw materials used in the production of the good or service E) all of the above 6. When there is a decrease in demand, what happens in the market? A) equilibrium would settle at a higher price and a higher quantity B) equilibrium would settle at a lower price and a higher quantity C) equilibrium would settle at a higher price and a lower quantity D) equilibrium would settle at a lower price and a lower quantity E) none of the above 7. What happens to a market when producers set their prices above the equilibrium price? A) quantity supplied will exceed quantity demanded, so there will be a surplus B) quantity demanded will exceed quantity supplied, so there will be a shortage C) excess supply means that price will continue to rise D) competition among sellers will cause prices to fall E) A and D 8. A change in any of the following can cause a change in demand EXCEPT A) income B) tastes and preferences C) the price of substitute goods D) increases in production technology E) the availability of a complimentary good 9. A change in any of the following can cause a change in supply EXCEPT A) taxes B) price of inputs C) price of the product D) number of suppliers E) productivity 10. Which of these is the most likely effect of an increase in the cost of production? A) a decrease in supply B) a decrease in demand C) an increase in demand D) an increase in supply E) all of the above 11. Demand for a product tends to be inelastic when the product A) has few, if any, substitutes. B) is expensive. C) is a luxury item. D) has many substitutes. E) all of the above 12. Demand for milk tends to be inelastic because milk is considered A) a necessity. B) a substitute. C) good on Cap’n Crunch. D) a luxury. E) all of the above 13. The price elasticity of demand measures how responsive A) buyers are to a change in income B) sellers are to a change in price C) buyers are to a change in price D) sellers are to a change in production costs. E) none of the above

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