What does the law of demand state? |
states that price and quantity demanded are inversely related. |
Graphically, the market demand curve is: |
the horizontal sum of individual demand curves. |
The relationship between quantity supplied and price is _____ and the relationship between quantity demanded and price is _____. |
direct, inverse |
A demand curve indicates what? |
indicates the quantity demanded at each price in a series of prices. |
What do the income and substitution effects account for? |
the downward sloping demand curve. |
When an economist says that the demand for a product has increased, this means that: |
consumers are now willing to purchase more of this product at each possible price. |
By an increase in demand we mean that : |
the quantity demanded at each price in a set of prices is greater. |
The quantity demanded of a product increases as its price declines because the: |
demand curve is downsloping. |
The law of supply indicates that: |
producers will offer more of a product at high prices than they will at low prices. |
The upward slope of the supply curve reflects the: |
law of supply. |
A surplus of a product will arise when price is: |
above equilibrium with the result that quantity supplied exceeds quantity demanded. |
If we say that a price is too high to clear the market, we mean that: |
quantity supplied exceeds quantity demanded. |
Productive efficiency refers to: |
the use of the least-cost method of production. |
If an economy produces its most wanted goods but uses outdated production methods, it is: |
not achieving productive efficiency. |
Allocative efficiency is concerned with: |
producing the combination of goods most desired by society. |
Allocative efficiency involves determining: |
the mix of output that will maximize society’s satisfaction. |
The equilibrium price and quantity in a market usually produces allocative efficiency because: |
marginal benefit and marginal cost are equal at that point. |
Price floors and ceiling prices: |
interfere with the rationing function of prices. |
A price floor means that: |
government is imposing a minimum legal price that is typically above the equilibrium price. |
An effective ceiling price will: |
result in a product shortage. |
An effective price floor will: |
result in a product surplus. |
Price ceilings and price floors: |
interfere with the rationing function of prices. |
A price ceiling means that: |
government is imposing a legal price that is typically below the equilibrium price. |
If a legal ceiling price is set above the equilibrium price: |
neither the equilibrium price nor equilibrium quantity will be affected. |
Microeconomics Chapter 3
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