![]() ![]() Question: If Microsoft cuts the price of its Zune mp3 player by 30%, how would we show the impact of this action on the demand curve for iPods?Īnswer: It would shift the current iPod demand curve to the left. Question: A competitive market is one in which:Īnswer: there are many buyers and sellers of the same good or service. How will this change in tastes affect the demand for bicycles?Īnswer: It will increase the demand for bicycles, all other things being equal. Question: There is a growing concern that global warming is changing people's tastes such that they are choosing to do things that will reduce their individual emission of carbon into the atmosphere. Question: If consumers expect that the price of coffee will be higher in the future:Īnswer: demand will increase and the demand curve will shift to the right. Question: If the price of a pound of Kenyan coffee decreases from $12 a pound to $10 a pound, we can expect a(n):Īnswer: increase in the quantity demanded of Kenyan coffee. In the local market for college textbooks: Question: Suppose that the number of students enrolled at Big University decreases. Question: If coffee sold at Starbucks is a normal good, then an increase in consumers' income will:Īnswer: increase the demand for Starbucks coffee. Question: The downward slope of the demand curve indicates that, all other things being equal:Īnswer: consumers will buy more of a good when its price decreases.Īnswer: consumers will demand a smaller quantity of a good the higher its price, all other things being equal. Question: What are the two sectors represented in a simple circular-flow diagram of the economy? ![]() Question: The flows represented in the circular-flow diagram include:Īnswer: the flow of money, goods and services, and factors of production. Question: _ is a simplified representation used to better understand a real-world situation. Two-sector Circular Flow of Income Model. Question: The factors of production include:Īnswer: land, labor, physical capital, and human capital. To learn how money is used for investment, check out our explanation on Money Markets. Question: In the simplest circular-flow diagram:Īnswer: firms supply goods and services to households, which, in turn, supply factors of production to firms. Question: After reading about a new factory that is opening in your hometown, you could correctly assume all of the following EXCEPT that: Question: The "all other things being equal assumption" means that all other relevant factors must: Question: The role of households in the circular flow is to:Īnswer: sell factors of production and buy goods and services. Question: If the values of homes decrease, resulting in households spending less, incomes in the economy will: Question: In building models, economists:Īnswer: often useful in forming economic policy. Question: Which of the following is traded in factor markets?Īnswer: other businesses in town will probably reduce hiring Question: For economists, the importance of an economic model is that it allows them to:Īnswer: focus on the effects of only one change at a time. ![]() Question: Factor markets are where _ are bought and sold. Question: What two markets are represented in the circular-flow diagram?Īnswer: The market for goods and services and the market for factors. ![]()
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