Question 1

Lobster is considered a

Accepted Answer

Lobster is considered a normal good in areas where it is plentiful and relatively inexpensive, such as coastal regions, but becomes an inferior good in areas where it is more expensive and less accessible. For example, in areas far away from the coast or in countries where it is considered a luxury item, lobster may be purchased less frequently as income levels decrease, making it an inferior good. Therefore, option A is the most appropriate choice. Option B and D are incorrect because lobster is not always an inferior good or a substitute/complement good. Option C is partially correct but not the best choice as it does not consider variations in income and location.

Question 2

Suppose that when the price of hamburgers increases, the Ruiz family buys more hot dogs.To the Ruiz family,

Accepted Answer

When the price of hamburgers increases, and the family buys more hot dogs, it suggests that hamburgers and hot dogs are substitutes. This means that if the price of one good goes up, people will switch to buying the other good because they serve as alternatives for each other.

Question 3

An inferior good is a good for which the quantity demanded increases as the price decreases, holding everything else constant.

Accepted Answer

An inferior good is one for which demand increases as consumer income decreases, not necessarily related to changes in its price.

Question 4

Suppose that when the price of ice cream increases, Liza buys less hot fudge.To Liza,

Accepted Answer

When two goods are complements, an increase in the price of one good leads to a decrease in the quantity demanded of the other good. In this case, an increase in the price of ice cream led to a decrease in the quantity demanded of hot fudge, indicating that the two goods are complements.

Question 5

Aging baby boomers are expected to have an effect on the housing market because

Accepted Answer

As people age, they typically downsize their housing to better manage their expenses and living arrangements. Therefore, aging baby boomers are expected to sell their larger homes for smaller ones and this downsizing behavior is likely to have an effect on the housing market.

Question 6

In January, buyers of gold expect that the price of gold will fall in February.What will happen in the gold market in January, holding everything else constant?

Accepted Answer

When buyers expect the price of gold to fall in the future, they will delay their purchases and reduce the quantity demanded in the current period. This will shift the demand curve to the left, indicating a decrease in demand at each price level. Therefore, the correct answer is D.

Question 7

During the recovery from the recession of 2008-2009, sales of low-cost beer fell and demand for microbrewed beer rose.This means

Accepted Answer

During economic recovery, people have more disposable income to spend on luxury items like microbrewed beer rather than low-cost beer. Therefore, the demand for microbrewed beer increases when income increases, and sales of low-cost beer fall. This does not necessarily mean that low-cost beer is of low quality or that the beer is being sold in larger containers.

Question 8

If the price of peaches (a substitute for plums)increases, the demand for plums will decrease.

Accepted Answer

When the price of a substitute good (like peaches for plums) increases, consumers are likely to switch to the cheaper alternative, thus increasing the demand for plums.

Question 9

Technological advancements have led to lower prices and an increase in sales of colour laser printers.How will this affect the market for laser printer toner cartridges?

Accepted Answer

The decrease in prices and increase in sales of color laser printers will lead to more people owning these printers, which in turn increases the demand for toner cartridges, shifting the demand curve to the right.

Question 10

Several studies have shown promising links between green tea consumption and cancer prevention.How will this affect the market for green tea?

Accepted Answer

The link between green tea and cancer prevention is likely to increase the demand for green tea, leading to a shift in the demand curve to the right. As a result, the quantity of green tea demanded will increase, and the price may also rise, but not necessarily enough to deter people from buying it. Therefore, option B is the most reasonable choice.

Question 11

Factory incentives on cell phones have encouraged consumers to upgrade their phones.How does this affect the market for bluetooth headsets?

Accepted Answer

The factory incentives on cell phones may encourage consumers to upgrade their phones, but this results in an increase in demand for newer technology, which includes Bluetooth headsets. Therefore, the increased demand for cell phones will also increase the demand for Bluetooth headsets.

Question 12

In September, buyers of silver expect that the price of silver will rise in October.What will happen in the silver market in September, holding all else constant?

Accepted Answer

Expectations of higher future prices can lead to an increase in demand now, as buyers aim to purchase before prices go up, shifting the demand curve to the right.

Question 13

The demand for medical services in Canada is expected to increase in upcoming years because

Accepted Answer

The fraction of people over the age of 65 is increasing, and this demographic tends to use more medical services than younger individuals. As Canada's population ages, there will likely be a greater demand for medical care. While medical services may become more efficient or accessible, these changes are unlikely to fully offset the impact of an aging population. Choices B and D are inaccurate, as medical services are generally becoming more expensive and wait times are a major concern for many Canadians. Choice C is incorrect, as the baby boom generation is currently between the ages of 57 and 75, so they are not yet lowering the fraction of people over the age of 50.

Question 14

Many universities offer student bus passes (often included with student fees)in an effort to reduce demand for on campus parking. This means universities must believe that

Accepted Answer

The fact that universities offer student bus passes in an effort to reduce demand for on campus parking indicates that they believe that the two are substitutes. Students who have access to a bus pass may choose to take the bus instead of bringing a car to campus and parking.

Question 15

If the price of propane-fuelled gas BBQs decreased, then

Accepted Answer

A decrease in the price of propane-fuelled gas BBQs would lead to an increase in the demand for gas BBQs. As a result, more propane would be needed to fuel these BBQs, leading to an increase in the demand for propane. Therefore, the correct answer is that the demand for propane would increase (option B).

Question 16

How does the increasing use of digital cameras affect the market for traditional camera film?

Accepted Answer

The increasing use of digital cameras reduces the need for traditional camera film, leading to a decrease in demand. This is represented by a leftward shift in the demand curve for traditional camera film.

Question 17

Buyers scrambled to secure stocks of Australian wool following a forecasted 11 percent decline in wool production.What will happen in the Australian wool market as a result of this announcement?

Accepted Answer

The announcement of an 11% decline in wool production is likely to lead to a decrease in the supply of wool in the market. As buyers scramble to secure stocks of Australian wool, the demand for Australian wool will increase. This increase in demand is likely to shift the demand curve for Australian wool to the right in anticipation of higher prices in the future.

Question 18

If consumers view tablet computers as good replacements for ________, demand will most likely be greater than if consumers view tablet computers as good replacements for ________.

Accepted Answer

Demand for tablet computers is likely to be greater if they are seen as replacements for laptop computers, which have a wide range of functions, rather than for e-readers, which are more specialized devices. This is because tablets that can replace laptops would appeal to a broader market.

Question 19

The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in the price of a substitute product.

Accepted Answer

The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in the consumer's income, not from a change in the price of a substitute product.

Question 20

If the price of gasoline increases, what will be the impact in the market for public transportation?

Accepted Answer

When the price of gasoline increases, people are more likely to use public transportation as an alternative, causing the demand curve for public transportation to shift to the right.

Quiz 3: Where Prices Come From: The Interaction of Supply and Demand