Question

1. Fill the blanks. 1. The price of cereal and the demand for milk have a ...(1)... relationship. 2. Income tax and the demand for air travel have a ...(2).... relationship.

Select one:

a. 1. Positive & 2. Positive

b. 1. Positive & 2. Negative

c. 1. Negative & 2. Positive

d. 1. Negative & 2. Negative

e. These variables have a neutral relation, which means that they do not affect each other

2.

What would happen if the price of a good were above the equilibrium price?

Select one:

a. There will be a excess supply and sellers will lower the price of the good

b. There will be a excess supply and buyers will bid up the price of the good

c. There will be a excess demand and sellers will raise the price of the good

d. There will be a excess demand and buyers will bid down the price of the good

e. Nothing will happen to the price unless the government intervenes

3.

Which of the following scenarios best illustrates the law of demand?

Select one:

a. Many consumers want to purchase the new Samsung television that is voice activated and connected to Alexa

b. People in Boston start using more public transportation when the price of gasoline rises

c. More Americans are taking vacation thanks to strong economic growth

d. Consumers decrease their use of salt after a study shows that increases the risk of a stroke

e. All of these answers are good examples of the law of demand

4.

Which of the following statements are normative? Check all that apply.

Select one or more:

a. The Federal government needs to increase taxes for wealthy people to reduce the national deficit

b. The economy is currently experiencing an economic recovery

c. There are over 10,000 students at Coastal Carolina University

d. People who smoke have a lower life expectancy

e. You should listen to classical music while you are studying

5.

Which of the following products has the highest income effect?

Select one:

a. Hulu streaming service

b. A Silver Bracelet

c. Electricity

d. Coffee

e. A haircut at a salon

6.

What will happen to the equilibrium price and equilibrium quantity of coffee if
income tax decreases? [Hint: Begin by drawing the supply and demand for coffee]

Select one:

a. Price and quantity will both increase

b. Price and quantity will both decrease

c. Price will increase but quantity will decrease

d. Price will decrease but quantity will increase

e. Income tax can not affect the price or quantity of coffee

7.

What will happen to the equilibrium price and quantity of oranges if a hurricane in Florida destroys half of the orange trees?

Select one:

a. Price will increase but quantity will decrease

b. Price will decrease but quantity will increase

c. Price and quantity will both increase

d. Price and quantity will both decrease

e. Quantity will decrease, but the price will stay the same

8.

What will happen to the equilibrium price and equilibrium quantity of coffee if the National Institute of Health declares that coffee can cause liver cancer and at the same time drought in South and Central America destroys half of the coffee supply? [Hint: Begin by drawing the supply and demand for coffee]

Select one:

a. Price will increase but quantity can increase, decrease or remain the same

b. Price will decrease but quantity can increase, decrease or remain the same

c. Quantity will increase but price can increase, decrease or remain the same

d. Quantity will decrease but price can increase, decrease or remain the same

e. Since there are two separate events there will be no net effect of price or quantity

Answer 1

1. Milk and cereal are complementary goods, hence price and demand are inversely related.

Income tax reduces the chances of trips are more money is paid as taxes. Hence they are also negatively related.

The correct option is therefore

d. 1. Negative and 2. Negative.

2. a. There will be excess supply and sellers will lower the price of the good.

A Market Surplus occurs when there is excess supply- that is quantity supplied is greater than quantity demanded. In this situation, some producers won't be able to sell all their goods. This will induce them to lower their price to make their product more appealing.

3. b. People in Boston start using more public transportation when the price of gasoline rises.

Because demand talks about the inverse relationship between the price and the quantity demanded, the above given is the apt example.

4. e. You should listen to classical music while you are studying.