62 terms

Chapter 3

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Terms in this set (...)

A schedule or a 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, other things equal.
demand
...
demand schedule
As the price of a good rises, the quantity demanded of the good falls, and as the price of a good falls, the quantity demanded of the good rises,
ceteris paribus. What law is this?
law of demand
because successive units of a particular product yields less and less marginal utility, consumers will buy additional units only if the price is progressively reduced
diminishing marginal utility
indicates that a lower price increases the purchasing power of a buyer's money income, enabling the buyer to purchase more of the product than before
income effect
suggests that at a lower price buyers have the incentive to substitute what is now a less expensive product for other products that are now relatively more expensive
substitution effect
...
demand curve
Factors other than price that determine the quantities demanded of a good or service
determinants of demand
Products whose demand varies directly with money income
normal goods
Products whose demand varies inversely with money income
inferior goods
good that can be used in place of another good
substitute goods
good that is used together with another good.
complementary good
is a shift of the demand curve to the right (an increase in demand) or to the left (a decrease in demand) in response to a change in one or more of the determinants of demand.
change in demand
is a shift of the demand curve to the right (an increase in demand) or to the left (a decrease in demand) in response to a change in one or more of the determinants of demand.
change in quantity demanded
______ is a schedule or curve showing the various 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 shows the quantities that will be supplied at various prices, other things equal
supply schedule
As the price of a good rises, the quantity supplied of the good rises, and as the price of a good falls, the quantity supplied of the good falls, ceteris paribus. This is what law?
law of supply
...
supply curve
change in the schedule and a shift of the curve
change in supply
movement from one point to another on a fixed supply curve; caused by a change in price
change in quantity supplied
market-clearing price) is the price where the intentions of buyers and sellers match. Quantity demanded equals quantity supplied
equilibrium price
the quantity at which the intentions of buyers and sellers match, so that the quantity demanded and the quantity supplied are equal
equilibrium quantity
At any price above equilibrium, quantity supplied exceeds quantity demanded
surplus
Any price below equilibrium, quantity demanded would exceed quantity supplied
shortage
production of any particular good in the least costly way.
productive efficiency
the particular mix of goods and services most highly valued by society
allocative efficiency
maximum legal price a seller may charge for a product or service. A price above the price ceiling is illegal
price ceiling
minimum price fixed by the government. A price below the ________is illegal
price floor
willingness and ability of buyers to...
-purchase different quantities of a good at different prices during specific time
price and quantity have a _____ relationship
inverse
Inverse relationship between price and quantity demanded is explained by
income effect and substitution effect
what are the basic determinants of demand
-consumers taste
-number of buyers in market
-consumer's incomes
-price of related goods
-consumer expectations
how is the change in demand shown on a graph versus change in quantity demanded?
-line moves is change in demand
-point moves is change in quantity demanded
When two. products are substitutes, an increase in the price of one will _______ the demand for the other.
increase
Haagen-Dazs ice cream and Ben & Jerry's ice cream; Coke and Pepsi is an example of _____ goods
substitute
If the price of a complement goes up, the demand for the related good will ________.
(Ex. Hot dogs and hot dog buns. )
decline
what are the determinants of supply
-resource prices
-technology
-taxes and subsidies
-prices of other goods
-producer expectations
-number of sellers in market
Higher resource prices _____ production costs and ______ profits
-raise
-lower
lower resource prices _____ production costs and _____ profits
reduce and increase
Increase in taxes will increase _______ and reduce _____
production costs and profits
government subsidizes the production of a good it in effect ______ producers' costs and ______ supply
lowers and increases
_____ drive prices down
surpluses
The ability of the competitive forces of supply and demand to establish a price at which selling and buying decisions are consistent is called
the rationing function of prices
When both the demand and supply curve shift, the result for either price or quantity is _______
ambiguous
Suppose that the supply of some good is constant and demand increases. The new intersection of supply and demand is at ________ values on the price and __________quantity axes
higher
What happens if the demand for some good is constant but supply increases?
The new intersection of supply and demand is located at a lower equilibrium price but at a higher equilibrium quantity
What are the effects of a price floor?
Quantity supplied will exceed quantity demanded; a surplus in the marketplace
How do you derive a market supply curve from individual supply curves?
Add up quantities supplied by all individual producers for each price correct
A price ceiling will result in a shortage only if the ceiling price is ________ correct the equilibrium price.
less than
Supply decreases and demand is constant
price increases and quantity decreases
Demand decreases and supply is constant.
price decreases and quantity decreases
Supply increases and demand is constant
price decreases an quantity increases
Demand increases and supply increases
price indeterminate and quantity decreases
Demand increases and supply is constant
both increase
Supply increases and demand decreases
price decreases and quantity indeterminate
Demand increases and supply decreases
increase and indeterminate
Demand decreases and supply decreases
indeterminate and decreases
In understanding and analyzing "demand," we focus on how much of a product the buyers are:
willing and able to buy
Which factor will decrease the current demand for a product
A decrease in the current price of a substitute product
If the market price is above the equilibrium price what will occure
A surplus will occur and producers will produce less and lower prices
When economists say that the demand for a product has decreased, they mean that
Consumers are now willing and able to buy less of this product at each possible price
If there was initially a shortage in the market for a product, then buyers will
Buyers will drive the price up