Econ Chapter 3 - Combined

Demand

A schedule or curve that shows the various amounts of a product that consumers are willing and able to purchase at each of a series of possible prices during a specified period of time

changes of deman

tastes number of buyers income price of related goods consumer expectations

what causes a movement along a curve

change in price, other things constant

what causes a shift among a curve

when other things are no longer constant

Demand Schedule

A representation of demand in table form

Law of Demand

As price falls, the quantity demanded rises, and as price rises, the quantity demanded falls

Diminishing Marginal Utility

In any specific time period, each buyer of a product will derive less satisfaction (or benefit, or utility) from each successive unit of the product consumed

Income Effect

A lower price increases the purchasing power of a buyer's money income, enabling the buyer to purchase more of the product than before

Substitution Effect

At a lower price buyers have the incentive to substitute what is now a less expensive product for similar products for similar products that are now relatively more expensive

Demand Curve

A curve representing data on a demand schedule, has a downward slope

price of related goods

A change in the price of a related good may either increase or d e crease the demand for a product, depending on whether the related good is a substitute or a complement:

Determinants of Demand

Consumers' tastes, the number of buyers in the market, consumers' incomes, the prices of related goods, and consumer expectations

if the supply curve goes up

the relationship between price and quantity demanded is negative

any point on the demand curve

will give you both price and quantity demanded

Normal Goods

Products whose demand varies directly with money income (superior goods)

increase in demand

shift to the right

Inferior Goods

Goods whose demand varies inversely with money income

Complementary Good

A good that is used together with another good (one goes up, the other goes down)

Substitute Good

A good that can be used in place of another good move in the same direction (supply of one goes up and the demand of the other goes up)

Change in Demand

A shift of the demand curve to the right (increase in demand) or to the left (decrease in demand)

Change in Quantity Demanded

A movement from one point to another point - from one price-quantity combination to another- on a fixed demand schedule or demand curve

Supply

Schedule or curve showing the varoius amounts of a product that producers are willing and able to make available for sale at each of a series of possible prices during a specific period

Supply Schedule

Table showing the quantities of a product that will be supplied at various prices, other things equal

Law of Supply

As price rises, the quantity supplies rises; as price falls the quantity supplied falls

relationship between price and quanitity demanded

inverse

market

combines buyers and sellers to resolve the conflict of how much to buy/sell for

Supply Curve

Graphical representation of a supply schedule, has an upward slope

Determinants of Supply

Resource prices, technology, taxes and subsidies, prices of other goods, producer expectations, and the number of sellers in the market

Change in Supply

An increase in supply shifts the curve to the right; a decrease in supply shifts it to the left

Change in Quantity Supplied

A movement from one point to another on a fixed supply curve. The cause of such a movement is a change in the price of the specific product being considered.

Equilibrium Price

The price where the intentions of buyers and seller match.

Equilibrium Quantity

The quantity demanded and quantity supplied at the equilibrium price in a competitive market

Surplus

Excess supply

Shortage

Excess demand

Productive Efficiency

The production of any particular good in the least costly way

Allocative Efficiency

The particular mix of goods and services most highly valued by society (minimum cost production assumed).

Price Ceiling

Sets the maximum legal price a seller may charge for a product or service

Price Floor

A minimum price fixed by the government

Which statement is consistent with the law of demand?

- A reduction in market price will lead to a decrease in quantity demanded.

- A reduction in market price will lead to an increase in quantity demanded.

- An increase in market price will lead to an increase in quantity demanded.

- At a zero price quantity demanded will be equal to zero.

- A reduction in market price will lead to an increase in quantity demanded.

Which of the following characteristics lead to a downward-sloping demand curve? Select all that apply.

- Increasing opportunity costs

- Increasing marginal benefit

- Diminishing preferences for a particular good

- A decline in the price of a related good

- An increase in purchasing power as market price decreases

- Diminishing marginal utility

- An increase in purchasing power as market price decreases - Diminishing marginal utility

How is a market demand curve derived from individual demand curves?

- Add up quantities demanded by all individual consumers for each price

- Calculate the average quantity demanded among all consumers

- Add up prices paid for each unit demanded by individuals

- Use the largest quantity demanded among all consumers for each price

- Add up quantities demanded by all individual consumers for each price

Which statement is consistent with the law of supply?

- An increase in market price will lead to an increase in quantity supplied.

- At a zero price quantity supplied will be infinite.

- A reduction in market price will lead to an increase in quantity supplied.

- An increase in market price will lead to a decrease in quantity supplied.

- An increase in market price will lead to an increase in quantity supplied.

Which of the following characteristics leads to a upward-sloping supply curve? Select all that apply.

- Increasing opportunity costs

- Increasing marginal costs

- Diminishing marginal utility

- A decrease in resource prices

- An increase in resource prices

- Increasing labor productivity

- Increasing opportunity costs - Increasing marginal costs

How do you derive a market supply curve from individual supply curves?

- Calculate the average quantity supplied among all producers

- Add up quantities supplied by all individual producers for each price

- Add up prices paid for each unit supplied by producers

- Use the largest quantity supplied among all producers for each price

- Add up quantities supplied by all individual producers for each price

In 2001 an outbreak of hoof-and-mouth disease in Europe led to the burning of millions of cattle carcasses. What impact do you think this had on the following?

- increase
- decrease

a. The supply of cattle hides:

b. Hide prices:

c. The supply of leather goods:

d. The price of leather goods:

a.) decrease b.) increase c.) decrease d.) increase

What effect will each of the following have on the demand for small automobiles such as the Mini-Cooper and Fiat 500?

- increase
- decrease
- no change
- cannot be determined

a. Small automobiles become more fashionable: .

b. The price of large automobiles rises (with the price of small autos remaining the same): .

c. Income declines and small autos are an inferior good: .

d. Consumers anticipate that the price of small autos will greatly come down in the near future: .

e. The price of gasoline substantially drops: .

a.) - increase b.) - increase c.) - increase d.) - decrease e.) - cannot be determined

What effect will each of the following have on the supply of auto tires? (Keeping all else constant)

- Increase
- Decrease
- No change

a. A technological advance in the methods of producing tires: .

b. A decline in the number of firms in the tire industry: .

c. An increase in the prices of rubber used in the production of tires: .

d. The expectation that the equilibrium price of auto tires will be lower in the future than currently: .

e. A decline in the price of large tires used for semi trucks and earth-hauling rigs, a substitute in production. (with no change in the price of auto tires): .

f. The levying of a per-unit tax on each auto tire sold: .

g. The granting of a 50-cent-per-unit subsidy for each auto tire produced: .

a.) - Increase b.) - Decrease c.) - Decrease d.) - Increase e.) - Increase f.) - Decrease g.) - Increase

Suppose that in the market for computer memory chips, the equilibrium price is $50 per chip. If the current price is $55 per chip, then there will be ________ of memory chips.

- surplus
- shortage
- equilibrium quantity

- surplus

A price ceiling will result in a shortage only if the ceiling price is _________ the equilibrium price.

- less than
- greater than
- equal to

- less than

How will each of the following changes in demand and/or supply affect equilibrium price and equilibrium quantity in a competitive market; that is, do price and quantity increase or decrease, or are the answers indeterminate because they depend on the magnitudes of the shifts?

- Increases
- Decreases
- Indeterminate

a. Supply decreases and demand is constant.

Price:
Quantity

b. Demand decreases and supply is constant.

Price:
Quantity:

c. Supply increases and demand is constant.

Price:
Quantity:

d. Demand increases and supply increases.

Price:
Quantity:

e. Demand increases and supply is constant.

Price:
Quantity:

f. Supply increases and demand decreases.

Price:
Quantity:

g. Demand increases and supply decreases.

Price:
Quantity:

h. Demand decreases and supply decreases.

Price:
Quantity:

a.) - Increases - Decreases b.) - Decreases - Decreases c.) - Decreases - Increases d.) - Indeterminate - Increases e.) - Increases - Increases f.) - Decreases - Indeterminate g.) - Increases - Indeterminate h.) - Indeterminate - Decreases

Will the equilibrium price of orange juice increase or decrease in each of the following situations?

- increase
- decrease
- indeterminate

a. A medical study reporting that orange juice reduces cancer is released at the same time that a freak storm destroys half of the orange crop in Florida: ___________ .

b. The prices of all beverages except orange juice fall by half while unexpectedly perfect weather in Florida results in an orange crop that is 20 percent larger than normal:__________ .

a.) - increase b.) - decrease

A price ceiling will result in a shortage only if the ceiling price is _________ the equilibrium price.

- greater than
- less than
- faster than
- equal to

- less than

table on page 59

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Econ Chapter 3 - Combined - Subjecto.com

Econ Chapter 3 – Combined

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Demand

A schedule or curve that shows the various amounts of a product that consumers are willing and able to purchase at each of a series of possible prices during a specified period of time

changes of deman

tastes number of buyers income price of related goods consumer expectations

what causes a movement along a curve

change in price, other things constant

what causes a shift among a curve

when other things are no longer constant

Demand Schedule

A representation of demand in table form

Law of Demand

As price falls, the quantity demanded rises, and as price rises, the quantity demanded falls

Diminishing Marginal Utility

In any specific time period, each buyer of a product will derive less satisfaction (or benefit, or utility) from each successive unit of the product consumed

Income Effect

A lower price increases the purchasing power of a buyer’s money income, enabling the buyer to purchase more of the product than before

Substitution Effect

At a lower price buyers have the incentive to substitute what is now a less expensive product for similar products for similar products that are now relatively more expensive

Demand Curve

A curve representing data on a demand schedule, has a downward slope

price of related goods

A change in the price of a related good may either increase or d e crease the demand for a product, depending on whether the related good is a substitute or a complement:

Determinants of Demand

Consumers’ tastes, the number of buyers in the market, consumers’ incomes, the prices of related goods, and consumer expectations

if the supply curve goes up

the relationship between price and quantity demanded is negative

any point on the demand curve

will give you both price and quantity demanded

Normal Goods

Products whose demand varies directly with money income (superior goods)

increase in demand

shift to the right

Inferior Goods

Goods whose demand varies inversely with money income

Complementary Good

A good that is used together with another good (one goes up, the other goes down)

Substitute Good

A good that can be used in place of another good move in the same direction (supply of one goes up and the demand of the other goes up)

Change in Demand

A shift of the demand curve to the right (increase in demand) or to the left (decrease in demand)

Change in Quantity Demanded

A movement from one point to another point – from one price-quantity combination to another- on a fixed demand schedule or demand curve

Supply

Schedule or curve showing the varoius amounts of a product that producers are willing and able to make available for sale at each of a series of possible prices during a specific period

Supply Schedule

Table showing the quantities of a product that will be supplied at various prices, other things equal

Law of Supply

As price rises, the quantity supplies rises; as price falls the quantity supplied falls

relationship between price and quanitity demanded

inverse

market

combines buyers and sellers to resolve the conflict of how much to buy/sell for

Supply Curve

Graphical representation of a supply schedule, has an upward slope

Determinants of Supply

Resource prices, technology, taxes and subsidies, prices of other goods, producer expectations, and the number of sellers in the market

Change in Supply

An increase in supply shifts the curve to the right; a decrease in supply shifts it to the left

Change in Quantity Supplied

A movement from one point to another on a fixed supply curve. The cause of such a movement is a change in the price of the specific product being considered.

Equilibrium Price

The price where the intentions of buyers and seller match.

Equilibrium Quantity

The quantity demanded and quantity supplied at the equilibrium price in a competitive market

Surplus

Excess supply

Shortage

Excess demand

Productive Efficiency

The production of any particular good in the least costly way

Allocative Efficiency

The particular mix of goods and services most highly valued by society (minimum cost production assumed).

Price Ceiling

Sets the maximum legal price a seller may charge for a product or service

Price Floor

A minimum price fixed by the government

Which statement is consistent with the law of demand?

– A reduction in market price will lead to a decrease in quantity demanded.

– A reduction in market price will lead to an increase in quantity demanded.

– An increase in market price will lead to an increase in quantity demanded.

– At a zero price quantity demanded will be equal to zero.

– A reduction in market price will lead to an increase in quantity demanded.

Which of the following characteristics lead to a downward-sloping demand curve? Select all that apply.

– Increasing opportunity costs

– Increasing marginal benefit

– Diminishing preferences for a particular good

– A decline in the price of a related good

– An increase in purchasing power as market price decreases

– Diminishing marginal utility

– An increase in purchasing power as market price decreases – Diminishing marginal utility

How is a market demand curve derived from individual demand curves?

– Add up quantities demanded by all individual consumers for each price

– Calculate the average quantity demanded among all consumers

– Add up prices paid for each unit demanded by individuals

– Use the largest quantity demanded among all consumers for each price

– Add up quantities demanded by all individual consumers for each price

Which statement is consistent with the law of supply?

– An increase in market price will lead to an increase in quantity supplied.

– At a zero price quantity supplied will be infinite.

– A reduction in market price will lead to an increase in quantity supplied.

– An increase in market price will lead to a decrease in quantity supplied.

– An increase in market price will lead to an increase in quantity supplied.

Which of the following characteristics leads to a upward-sloping supply curve? Select all that apply.

– Increasing opportunity costs

– Increasing marginal costs

– Diminishing marginal utility

– A decrease in resource prices

– An increase in resource prices

– Increasing labor productivity

– Increasing opportunity costs – Increasing marginal costs

How do you derive a market supply curve from individual supply curves?

– Calculate the average quantity supplied among all producers

– Add up quantities supplied by all individual producers for each price

– Add up prices paid for each unit supplied by producers

– Use the largest quantity supplied among all producers for each price

– Add up quantities supplied by all individual producers for each price

In 2001 an outbreak of hoof-and-mouth disease in Europe led to the burning of millions of cattle carcasses. What impact do you think this had on the following?

– increase
– decrease

a. The supply of cattle hides:

b. Hide prices:

c. The supply of leather goods:

d. The price of leather goods:

a.) decrease b.) increase c.) decrease d.) increase

What effect will each of the following have on the demand for small automobiles such as the Mini-Cooper and Fiat 500?

– increase
– decrease
– no change
– cannot be determined

a. Small automobiles become more fashionable: .

b. The price of large automobiles rises (with the price of small autos remaining the same): .

c. Income declines and small autos are an inferior good: .

d. Consumers anticipate that the price of small autos will greatly come down in the near future: .

e. The price of gasoline substantially drops: .

a.) – increase b.) – increase c.) – increase d.) – decrease e.) – cannot be determined

What effect will each of the following have on the supply of auto tires? (Keeping all else constant)

– Increase
– Decrease
– No change

a. A technological advance in the methods of producing tires: .

b. A decline in the number of firms in the tire industry: .

c. An increase in the prices of rubber used in the production of tires: .

d. The expectation that the equilibrium price of auto tires will be lower in the future than currently: .

e. A decline in the price of large tires used for semi trucks and earth-hauling rigs, a substitute in production. (with no change in the price of auto tires): .

f. The levying of a per-unit tax on each auto tire sold: .

g. The granting of a 50-cent-per-unit subsidy for each auto tire produced: .

a.) – Increase b.) – Decrease c.) – Decrease d.) – Increase e.) – Increase f.) – Decrease g.) – Increase

Suppose that in the market for computer memory chips, the equilibrium price is $50 per chip. If the current price is $55 per chip, then there will be ________ of memory chips.

– surplus
– shortage
– equilibrium quantity

– surplus

A price ceiling will result in a shortage only if the ceiling price is _________ the equilibrium price.

– less than
– greater than
– equal to

– less than

How will each of the following changes in demand and/or supply affect equilibrium price and equilibrium quantity in a competitive market; that is, do price and quantity increase or decrease, or are the answers indeterminate because they depend on the magnitudes of the shifts?

– Increases
– Decreases
– Indeterminate

a. Supply decreases and demand is constant.

Price:
Quantity

b. Demand decreases and supply is constant.

Price:
Quantity:

c. Supply increases and demand is constant.

Price:
Quantity:

d. Demand increases and supply increases.

Price:
Quantity:

e. Demand increases and supply is constant.

Price:
Quantity:

f. Supply increases and demand decreases.

Price:
Quantity:

g. Demand increases and supply decreases.

Price:
Quantity:

h. Demand decreases and supply decreases.

Price:
Quantity:

a.) – Increases – Decreases b.) – Decreases – Decreases c.) – Decreases – Increases d.) – Indeterminate – Increases e.) – Increases – Increases f.) – Decreases – Indeterminate g.) – Increases – Indeterminate h.) – Indeterminate – Decreases

Will the equilibrium price of orange juice increase or decrease in each of the following situations?

– increase
– decrease
– indeterminate

a. A medical study reporting that orange juice reduces cancer is released at the same time that a freak storm destroys half of the orange crop in Florida: ___________ .

b. The prices of all beverages except orange juice fall by half while unexpectedly perfect weather in Florida results in an orange crop that is 20 percent larger than normal:__________ .

a.) – increase b.) – decrease

A price ceiling will result in a shortage only if the ceiling price is _________ the equilibrium price.

– greater than
– less than
– faster than
– equal to

– less than

table on page 59

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