# Microeconomics Chapter 3

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### demand

What is a schedule which shows the amounts or quantities of a product that consumers are willing and able to purchase at each and every price?

### consumers will buy more of a product at lower prices than higher prices

What is the law of demand?

### income and substitution effect

What are the two effects for the law of demand?

### is when product prices change, consumers real income changes. When the product price decreases, consumers are able to buy more of it because the real income increases

The income effect _____.

### real income

What is the purchasing power of money income?

### is when product price changes, consumers purchase larger quantities of the now cheaper product and less of the more expensive one. When the product price decreases, consumers are willing to buy more of it because they will shift their purchases from high-price to low-price products.

The substitution effect ____.

### by the horizontal summation of all the individual demand curves for a specific product.

How is the market demand obtained?

### market demand

What is the total quantities buyers are willing and able to purchase at alternative prices?

### shift in the entire demand curve

A change in demand is shown by a _____.

### taste/preference, number of buyers, money income (normal/inferior goods), price related goods (substitute/compliment goods) and expectations concerning future prices or income.

What are the determinants of demand?

### demand varies directly with income (buy more)

What are normal goods?

### demand varies indirectly with income, generic good (buy less)

What are inferior goods?

### substitute good

What are goods that are directly related between a change in price of one good and the demand for the other good?

### complement good

What are goods that are indirectly related between a change in price of one good and the demand of another good?

### A change in demand is a shift along the entire curve caused by a change in determinants. The change in quantity demanded is shown as a movement along the demand curved and caused by a change in price.

What is the difference between demand and quantity demanded?

### supply

What shows the amounts or quantities that producers are willing and able to sell at each and every price?

### producers will offer more of a product at higher prices than lower prices

What is the law of supply?

### resource prices, technology, taxes and subsidies and number of sellers

What are the determinants of supply?

### A change in supply is shown as a shift of entire supply curve and is caused by a change in determinants. A change in quantity supplied is shown as a movement along the supply curve and is caused by a change in price.

What is the difference between supply and and quantity of demand supplied?

### quantity supplied equals quantity demanded

Market equilibrium is when _____.

### surplus

When quantity supplied is greater than quantity demanded there is a ___.

### shortage

When quantity supplied is less than quantity demanded there is a ___.

### price ceiling

What is the upper limit of a price good, that must be below the equilibrium price? (max)

### price floor

What is the lower limit of a price good, that must be above the equilibrium price? (min)

Example: