Place in order the stages of a market experiencing a shortage and then regaining equilibrium.
1. A popular celebrity endorses a product.

2. Demand for product increases

3. More items are purchased than are being manufactured

4. Sellers raise prices, which causes a partial but not complete pullback of demand.

5. Sellers use increased revenue to fund increased production

6. Supply again matches demand

Individuals purchase inferior goods out of necessity, rather than choice.
True

f there is currently a shortage of coffee in the economy, then the - is greater than the -. According to the -, in order for the market to reach equilibrium, the price must -.
1. quantitiy demanded
2. quantity supplied
3. law of supply and demand
4. increase

What is the most likely effect on the demand of apples if the price of pears increases?
The demand for apples increases

"Shortage" and "scarcity" mean the same thing.
False

Match each inventory situation to the market condition with which it is associated.

1. inventory buildup

2. inventory depletion
1. surplus

2. shortage

Identify each good as being either a normal good or an inferior good.

1. generic ketchup

2. microwaveable cup of noodles

3. public transportation

4. brand ketchup

5. filet mignon

6. ipad
1-3 inferior good

4-6 normal good

Price of coffee per cup Number of cups supplied
$7.00 100
$6.00 80
$5.00 60
$4.00 40
$3.00 20
$2.00 0

If the price of a cup of coffee increases from $3.00 to $5.00, how many additional cups will the coffee shop supply?
40

Consider the demand schedule for salmon in a market with two consumers, Derek and Meredith:
Price of salmon
(per pound) Derek's demand
(per month) Meredith's demand
(per month)
$20.00 0 0
$17.50 0 1
$15.00 1 2
$12.50 1 3
$10.00 2 4
$7.50 2 5
$5.00 3 6
$2.50 3 7
$0.00 4 8

What is the quantity demanded by the market at a price of $12.50 per pound?
4

According to Adam Smith, people are motivated to be as productive as possible based on their own -. In a market economy, - respond to both -. Goods and services are then exchanged, and resources are allocated to their highest-valued use as if guided by -.
1. self-interest

2. prices

3. supply and demand

4. an inivisible hand

Consider the market for tablet computers (like iPads and Android tablets). Suppose the average price of an iPad goes up by $20 when a major online retailer changes its sale policies. Which of the following will occur?
the demand for android tablets will increase

the price of android tablets will increase

Suppose the government believes that there are too many cigarettes in the market. Which of the following policies could the government implement to decrease the supply of cigarettes?
tax the tobacco crop, tax the manufacturer

Suppose that the supply of automobiles is given by the equation
P = -5000 + 2000Q

where P is the price in dollars and Q is the quantity of cars. At a price of $23,000 each, how many cars will be supplied?
14

The law of supply applies to normal goods, but not inferior goods.
false