True or False Type questions:
The price of limes could be a nonprice determinant of the supply of lemons.
The demand curve for a good shows the same information as the demand schedule.
Tastes and preferences act as nonprice determinants of demand.
In general, an increase in demand tends to increase equilibrium price and decrease equilibrium quantity.
If both supply and demand increase, the price of the good will also increase.
If demand increases and supply decreases, the price of the good will increase.
The more precise a model is, the more likely it is to be accurate.
The correct answer and explanation is :
Here are the answers to the True or False statements along with explanations:
- The price of limes could be a nonprice determinant of the supply of lemons.
False.
The price of limes is a nonprice determinant of the demand for lemons, not the supply. A change in the price of related goods, such as limes, can affect the demand for lemons (as they are substitutes), but it does not directly influence the supply of lemons. Supply is affected by factors like production costs, technology, or input prices, not the price of a related good. - The demand curve for a good shows the same information as the demand schedule.
True.
The demand curve and the demand schedule both represent the relationship between the price of a good and the quantity demanded. The demand schedule is a table that lists the quantity demanded at different price levels, while the demand curve is a graphical representation of this data. - Tastes and preferences act as nonprice determinants of demand.
True.
Tastes and preferences are indeed nonprice determinants of demand. These factors affect how much of a good consumers are willing to buy at any given price. A change in consumer preferences can lead to a shift in the demand curve, either to the right (increase in demand) or to the left (decrease in demand). - In general, an increase in demand tends to increase equilibrium price and decrease equilibrium quantity.
False.
An increase in demand typically causes both the equilibrium price and quantity to rise. When demand increases, there is upward pressure on both price and quantity, assuming supply remains constant. - If both supply and demand increase, the price of the good will also increase.
False.
If both supply and demand increase, the equilibrium price may remain unchanged, depending on the relative magnitudes of the shifts. If the increase in demand is larger than the increase in supply, the price will rise. Conversely, if the increase in supply is larger, the price could fall. - If demand increases and supply decreases, the price of the good will increase.
True.
When demand increases and supply decreases, both factors push the price up. Increased demand creates upward pressure on the price, and decreased supply also limits the availability of the good, leading to a higher price. - The more precise a model is, the more likely it is to be accurate.
False.
Precision in a model does not necessarily make it more accurate. A model can be highly precise in its predictions but still inaccurate if it is based on incorrect assumptions or flawed data. Accuracy depends more on the quality of the underlying assumptions and data, not just the precision of the model itself.
These explanations show the underlying principles of economics regarding supply and demand, as well as how different factors affect equilibrium outcomes.