UNIT 2 REVIEW
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Supply & Demand
Determinants of Supply & Demand
Shifts in Supply & Demand
Equilibrium Price, Price Floors & Ceilings
Elasticity of Demand

In the “Market in Wheat” game, which of the
following factors was the most important in students
securing the largest individual profits?
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Number of trades
Ability to auction wheat correctly
Always trying for the highest/lowest price
Getting rid of bad cards quickly

In the “Market in Wheat” game, which of the following
best describes what would happen in a round where we
limited the amount of sellers (5 sellers, 25 buyers)?
Buyers would be able to drive up the price in order to get
their wheat.
 Sellers would be able to drive down the price in order to
get rid of their wheat.
 Sellers would be able to drive up the price because there
is a limited amount of wheat.
 Buyers would be able to drive down the price because
sellers would be desperate to get rid of the wheat.


In the “Market in Wheat” game, which of the following
best describes what would happen in a round where we
only allowed trading at the lowest prices?
Buyers and sellers would make equal profits.
 Most buyers would make large profits, most sellers
would lose money.
 Most sellers would make large profits, most buyers would
lose money.
 Most buyers would make large profits, Most sellers would
make large profits.
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The supply schedule shows the relationship between
which two elements?
 The
price of a good and the quantity of that good a
company is willing to produce at that price.
 The price of a good and the cost of producing that
good.
 The price of a good and the number of consumers who
would buy the good at that price.
 The price of a good and its opportunity cost.

The law of demand states:
 As
income increases, people consume more of all
goods.
 The demand for a good increases with the number of
consumers in the market.
 As the price of a good decreases, consumers
generally purchase more of that good.
 The supply of a good increases in proportion to the
demand for it.
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What are inferior goods?
 Goods
that are not well produced.
 Goods that no one wants to buy.
 Goods where the demand falls when income falls.
 Goods where the demand falls when income rises.

The demand for exercise equipment has increased
as America becomes more health conscious. This is
due to which determinant?
 substitutes
 complements
 income
 tastes
and preferences
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As more new families move to city, the number of
students in those schools increase. This is due to
which determinant?
 income
 population
 tastes
and preferences
 complements

The price of beef decreases, resulting in cheaper
hamburgers. This is due to:
 cost
of inputs
 price of related outputs
 technology
 number of firms

Baden Sports builds a new factory to make more
footballs. This increase in supply is due to what
determinant?
 Income
 Population
 Size
of Industry
 Technology

Which of the following products could be
considered “related outputs”?
 Crew
neck undershirts & V-neck undershirts
 Computer chips and computers
 Milk and Chocolate syrup
 Peanut Butter and Jelly

Celery and Veggie Dip would be an example of
 substitutes
 complements
 tastes
 preferences

Which of the following are substitutes?
 Peanut
Butter and Jelly
 Denim Jeans and Denim Jackets
 Fords and Chevrolets
 Apples and Ketchup

Which of the following is not a determinant of
demand?
 price
of complements
 cost of production
 tastes and preferences
 income level of consumers
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Which of the following is not a determinant of the
supply of peanut butter?
 The
price of peanuts.
 The wages of the Peter Piper Peanut Packing
Corporation packers.
 The price of peanut butter substitutes.
 Existing peanut butter-making technology.

Congress raises the Personal Income Tax rate, which
of the following take place?
 Supply
Up
 Supply Down
 Demand Up
 Demand Down

The assembly line at Ford Motor Company has
introduced new technology to improve production.
Which of the following takes place?
 Supply
Up
 Supply Down
 Demand Up
 Demand Down

At the Leather Company, the price of leather shoes
increases, what happens with leather purses?
 Supply
Up
 Supply Down
 Demand Up
 Demand Down

Price of Diet Coke falls, what happens with Diet
Pepsi?
 Supply
Up
 Supply Down
 Demand Up
 Demand Down

The price of wood increases, which determinant is at
play here and what happens to the housing market?
 Related
Outputs / Supply Down
 Complementary good / Supply Up
 Cost of inputs / Supply Down
 Income / Supply Up
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If there is a positive (right) shift in demand, what
happens to the equilibrium price of the product?
 falls
 rises
 stays
the same
 Egg McMuffin
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If there is a decrease in the quantity demanded,
what happened to the price?
 falls
 rises
 stays
the same
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If there is an increase in the quantity supplied,
ceteris paribus, what happened to the price?
 falls
 rises
 Shift
right
 Shifts left

There will be a movement along a fixed supply
curve if which one of the following changes?
 Price
 Lower
production cost
 Price of related outputs
 Size of industry

If equilibrium price and quantity both decrease it is
likely that
 Demand
curve has shifted left
 Demand curve has shifted right
 Supply curve has shifted left
 Supply curve has shifted right
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If the price of a substitute product for coal
increases, then…
 The
supply curve for coal will shift to the right.
 The demand curve for coal will shift to the right.
 Equilibrium price and quantity of coal will not change.
 The quantity of coal demanded will decrease.
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Which of the following would cause the demand
curve of a product to shift to the left?
 An
increase in the price of a substitute.
 A decrease in the price of a complement
 A decrease in the population eligible to buy the
product.
 An increase in the incomes of consumers.

Which of the following would cause the price of a
product to increase?
 New
technology to make the product.
 More companies making the product.
 The sales of a substitute increasing.
 The price of a complement decreasing.

Which of the following would cause the quantity
supplied of a product to decrease?
 An
increase in the price of a related output.
 An increase in the price of a complement.
 An increase in the price of a substitute.
 An increase in the advertising budget for the product.
What is the difference between…
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in Demand (a shift left or right)
AND
in Quantity Demanded (movement along the
demand curve)
Price Ceilings (can’t sell above that price) and Price
Floors (can’t sell below)
Elastic (responsive to price changes) & Inelastic (not
as responsive) products