Price changes Quiz

B. A decrease in the number of competing firms. This reduces competition, allowing remaining firms to charge higher prices. A decrease in the cost of raw materials (A) would likely lower prices, as would decreases in consumer income (C) or the price of substitute goods (D).

C. The demand for substitutes may decrease. When the price of a good falls, consumers may switch to it from substitutes, reducing demand for those substitutes. Consumers buy more, not less (A), and producers supply more, not less (B), of a good when its price decreases. The government's tax revenue (D) would not necessarily increase.

B. A bumper harvest of organic vegetables. This increases supply, putting downward pressure on prices. A successful advertising campaign (A) would likely increase demand and prices. A decrease in the number of organic farms (C) would likely decrease supply and increase prices. A decrease in the price of non-organic vegetables (D) might decrease demand for organic vegetables, but this would likely lead to a decrease in the price of organic vegetables only if the demand decrease was smaller than the supply increase.

C. The demand for complements may decrease. When the price of a good rises, consumers may buy less of it and also less of its complements. Consumers buy less, not more (A), of a good when its price increases. Producers supply more, not less (B), of a good when its price increases. The government's tax revenue (D) would not necessarily decrease.

C. An increase in the cost of generating electricity. This would shift the supply curve to the left, leading to a higher equilibrium price. A decrease in the cost of generating electricity (A) or an increase in the number of electricity providers (D) would likely decrease the price of electricity. A decrease in the demand for electricity (B) would also likely decrease its price.

A. An increase in the demand for the good. When the price of a complement falls, consumers are more likely to buy the good and the complement together. This is an example of a positive cross-price elasticity of demand. A decrease in the demand for the good (B) would occur if the price of a substitute fell. An increase (C) or decrease (D) in the supply of the good would be caused by changes in the cost of production or the number of firms, not by a change in the price of a complement.

C. An improvement in aircraft technology that reduces operating costs. This would shift the supply curve to the right, leading to a lower equilibrium price. An increase in the cost of jet fuel (A) or a decrease in the number of airlines (D) would likely increase the price of air travel. An increase in the demand for air travel (B) would also likely increase its price.

A. An increase in the demand for the good. When the price of a substitute rises, consumers are more likely to switch to the good. This is an example of a negative cross-price elasticity of demand. A decrease in the demand for the good (B) would occur if the price of a complement rose. An increase (C) or decrease (D) in the supply of the good would be caused by changes in the cost of production or the number of firms, not by a change in the price of a substitute.

C. A successful marketing campaign that increases the game's popularity. This would shift the demand curve to the right, leading to a higher equilibrium price. A decrease in the number of gamers (A) or an increase in the number of video game publishers (D) would likely decrease the price of a new video game. A decrease in the cost of developing video games (B) would also likely decrease its price.

C. The demand for substitutes may decrease. When the price of a good falls, consumers may switch to it from substitutes, reducing demand for those substitutes. Consumers have more money to spend on other goods (A), not less. Producers earn more revenue (B), not less, if the price decrease is accompanied by a sufficient increase in quantity sold. The government's tax revenue (D) would not necessarily increase.

B. A decrease in the cost of producing smartphones. This would shift the supply curve to the right, leading to a lower equilibrium price. A decrease in the number of smartphone buyers (A) or a decrease in the number of smartphone manufacturers (C) would likely increase the price of smartphones. An increase in the price of smartphone accessories (D) would not directly affect the price of smartphones.

B. Producers earn more revenue. When the price of a good rises, producers earn more revenue per unit sold, assuming the quantity sold does not decrease by a proportionately larger amount. Consumers have less money to spend on other goods (A), not more. The demand for complements may decrease (C), not increase. The government's tax revenue (D) would not necessarily decrease.

C. A successful marketing campaign that increases the film's popularity. This would shift the demand curve to the right, leading to a higher equilibrium price. A decrease in the number of DVD players (A) or an increase in the number of DVD rental stores (D) would likely decrease the price of a new film release on DVD. A decrease in the cost of producing DVDs (B) would also likely decrease its price.

C. The demand for substitutes may decrease. When the price of a good falls, consumers may switch to it from substitutes, reducing demand for those substitutes. Consumers buy more of the good (A), not less. Producers supply more of the good (B), not less. The government's tax revenue (D) would not necessarily increase.

B. A decrease in the cost of developing computer games. This would shift the supply curve to the right, leading to a lower equilibrium price. A decrease in the number of gamers (A) or a decrease in the number of computer game publishers (C) would likely increase the price of a new computer game. An increase in the price of computer game consoles (D) would not directly affect the price of a new computer game.