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1. Suppose that in October the price of a cup of cafe latte was $1.50 and 400 lattes were consumed. In November the price of a latte was $2.00 and 200 lattes were consumed. What might have caused this change?
The price of tea (a substitute for cafe lattes) fell.
2. A supply curve is defined as the relationship between the price of a good and the quantity that producers are willing to sell.
3. An effective minimum wage law will cause unemployment for some affected workers.
4. A price ceiling is a legal maximum on the price at which a good can be sold.
5. From Figure 1 on the figure sheet, the market for good X is initially in equilibrium at $5.00. The government then places a perunit tax on good X, as shown by the shift of S1 to S2. As a result, consumers end up paying $6.25 per unit, producers end up receiving and keeping $4.00 per unit.
6. From Figure 1 on the figure sheet, which of the following is the best example of the results in this graph? In the lumber market there has been greater restrictions on the number of lumber acres that can be harvested.
7. The Law of Demand can be explained as the higher the price, the smaller the quantity demanded, ceteris paribus .
8. A tax wedge is a consequence of a tax on a good because the tax induces buyers to consume less, and sellers to produce less.
9. Suppose that the government sets a maximum price for milk at $5 a gallon and the equilibrium price of a gallon is $3. How much quantity traded will this maximum price lead to? at the equilibrium quantity.
10. A ban on imports will ________ the price domestic consumers pay for the good, and ________ the amount of the good consumed by domestic consumers. increase; decrease
11. An important determinant of the amount of grains harvested next year by Ethiopian farmers is the amount of seeds planted this year. Given that Western nations have guaranteed to donate five hundred tons of grain next year, this year the Ethiopian farmers will: plant less seeds as the price of grain will be lower with the food aid.
12. Suppose that there has been a decline in the price of pork. What effect will this have on the market for beef?
A decrease in demand
13. A government sometimes creates a surplus of a product by setting a minimum price at which the product may be sold to consumers. This is called a price floor.
14. Assume that coffee and tea are substitutes. When the price of coffee increases the demand for tea increases.
15. A good for which demand decreases when income decreases is known as a(n) ________ good. normal
16. If the equilibrium price of a good decreases and the equilibrium quantity of the good decreases, we can conclude that demand decreased.
17. Suppose that a new advertising campaign extolling the virtues of apple juice is successful, and a major freeze destroys half of the country's apple crop. What happens to the price and quantity of apple juice?
The equilibrium price of apple juice rises and the equilibrium quantity of apple juice might rise or fall.

18. Using the above figure, if your city imposes a tax of $100 per apartment: consumers pay $60 and landlords pay $40 tax per apartment.
19. When a tax is placed on a product, the price paid by buyer rises, and the price received by sellers falls.