Intro to Economics
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When an economist says that the demand for a product has increased, this means that:
quantity demanded is greater at each possible price
When movie ticket prices increase, families tend to spend less time watching movies and more time at home watching videos instead. This best reflects:
the substitution effect
If consumer incomes increase, the demand for product Y:
will shift to the right if Y is a normal good
When drawing demand and supply curves, economists are assuming that the primary influence on production and purchasing decisions is:
Which one of the above diagrams best illustrates the effect of an increase in crude oil prices on the market for gasoline?
A decrease in the price of a product will increase the amount of it demanded because:
the lower price induces consumers to use this product instead of similar products
"Because of unusually good growing conditions, the supply of strawberries has substantially increased." This statement indicates that:
the amount of strawberries that will be available at various prices has increased
Goods X and Y are complements while goods X and Z are substitutes. If the supply of good X increases:
the demand for Y will increase while the demand for Z will decrease. The increased supply of X will decrease its price, increasing the demand for complementary good Y and decreasing the demand for substitute good Z.
An improvement in production technology for a specific good will cause a(n):
drop in price and increase in quantity demanded
Improvement in technology
The improved technology will increase the supply of the product, thereby lowering the price and increasing the quantity demanded.
Demand is defined as the relationship between price and quantity demanded, all else equal. An "increase in demand" occurs if this relationship exhibits greater quantity demanded at each possible price.
The substitution effect is reflected in consumer responses to higher prices as they shift purchases away from the good or service whose price has risen, purchasing other alternatives instead. A lower price makes this product a more desirable alternative relative to other similar products whose prices have not changed. This is the "substitution effect."
The definition of a normal good is one for which demand increases (shifts to the right) when income increases.
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