Suppose the price of lumber decreases. In the market for new homes, we would expect which of the following to occur?
A) the market clearing price will fall and the equilibrium quantity will rise.
B) the market clearing price will rise and the equilibrium quantity will fall.
C) both the market clearing price and the equilibrium quantity will fall.
D) both the market clearing price and the equilibrium quantity will rise.
Answer: A
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If the price of paint increases, the substitution effect will cause
a. people to paint their homes more often b. people to use more paint than they did before c. the quantity of paint demanded to increase d. the quantity of paint supplied to decrease e. people to use less paint
"In 2008, air travel decreased substantially despite significant reductions in ticket prices." If this information is correct, it indicates that the law of demand did not apply to air travel in 2008.
a. true b. false