CHAPTER 3 Demand, Supply, and Market Equilibrium

295. An increase in consumer incomes will cause a decrease in the demand for an inferior good.

296. If two goods are complements, a decline in the price of one will cause an increase in the demand for the other.

297. The law of supply states that, ceteris paribus, there is an inverse relationship between the price of a good and the quantity supplied of the good.

298. A decrease in the prices of resources for producing a product will increase the supply of the product.

299. The development of a new production technique that lowers the cost of producing product X will shift the supply curve of product X to the right.

300. An increase in the supply of product X, with demand held constant, will increase the price of product X.

301. A surplus indicates that the quantity demanded is greater than the quantity supplied at that price.

302. A price fixed above the equilibrium price of a product will cause a shortage of that product.

303. A price fixed below the equilibrium price of a product will cause a shortage of that product.

304. If the supply of a product decreases and demand increases, the equilibrium price and quantity will increase.

305. An increase in supply and demand will lead to an increase in the equilibrium price and an indeterminate change in the equilibrium quantity.

306. A decrease in the supply of lettuce decreases its equilibrium price and increases its equilibrium quantity.

307. An increase in the demand for an American flag increases its equilibrium price and increases its equilibrium quantity.

308. When demand for personal computers increases, there is an increase in supply but no increase in the quantity supplied as the equilibrium price rises.

309. If the increase in supply is less than the decrease in demand the equilibrium price will increase.

310. If the increase in demand is greater than the decrease in supply the equilibrium quantity will increase.