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104 terms

Economics Exam 1

STUDY
PLAY
Price quantity demanded
Demand is a relationship between _______ and ___________
Quantity demanded
The quantity of a good that people want to buy at a given price during a specific period of time
declines, rises
The law of demand states that a quantity demanded of a good in a market ______ as its price ______
negatively
The demand curve slopes downward from left to right because the quantity demanded is ______ related to price
Right
An increase in demand shifts the demand curve to the _____
Left
A decrease in demand shifts the demand curve to the ____
Consumer preferences, consumer information, consumers incomes, number of consumers in the market, consumers expectations of future prices, prices of closely related goods
What causes shifts in the demand curve?
Increase
If the preference for a product increases, then the demand for that product will ________
Increase
If a sufficient number of demanders expect the price of the good to increase in the future, these people will ______ increase their demand of the product today in order to stock up on the good and avoid the higher price in the future.
Decrease
If a sufficient number of demanders think the price will decline tomorrow, the demand today will ________
increases
As the number of demanders in the market or population increases the demand for the good ______
Normal
If demand increases after an increase in income, the the good is considered a _____ good
Inferior
If demand decreases after an increase in income, the good is considered an _____ good
Decline
If the price of a complement increases, the demand for the product in focus will ______
Decline
If the price of sugar increases, the quantity of coffee demanded at each price will ______
Increase
When the price of a substitute increases, the demand for the good in focus will ______
When the quantity demanded changes as a result of a change in the price of the good
When does movement along the demand curve occur?
change in quantity demanded
Economists refer to a movement along the demand curve as a
price
A shift in the demand curve occurs if there is a change that is due to any source except the ______
price, quantity supplied
Supply is a relationships between _____ and _______
higher, higher
The law of supply says that the _____ the price, the _____ the quantity supplied
positively
The law of supply says that the price and the quantity supplied are ______ related
increase
When the price of a good increases, it leads to an ____ in the quantity supplied
Right
When supply increases, the supply curve shifts to the ____
decreases (shift to the left)
As the prices of factors increase, the costs of production increases, and supply _______
increase (shift to the right)
If factor prices decline, then it is cheaper to produce and supply will _______
decrease
Assume Good A and Good B are substitutes in production. As the price of Good B increases, the supply of Good A will _____ as suppliers shift production into Good B
Technology, prices of related goods, expected future prices number of producers
What effects the supply curve?
increase
As the number of producers increases, the supply of the good will _________
increase
An improvement in technology reduces the amount of factors of production required to produce a given amount of output. Therefore, an improve in technology will reduce the cost of production and lead to an ________ in supply
increase, increase, increase
Assume Good A and Good B are complements in production. If the price of Good B increases, the supply of Good A will _____. When the price of Good B _____, the quantity of Good B supplied also ________
increase, reduce
Taxes _____ firms costs and ______ supply
Left
The supply curve shifts to the _______ when a tax on what firms sell in the market increases
quantity supplied changes as a result of a change in the price of the good
Movement along the supply curve occurs when the
price
A shift in the supply curve occurs if there is a change due to any source except the ___
Rises
When there is a shortage, price _____
Falls
Whenever there is a surplus, price _____
the same
At the market equilibrium, price is _____
supplied
Surplus is a situation in which quantity _______ is greater than quantity demanded
demanded
Shortage is a situation in which quantity ______ is greater than quantity supplied
reduces, increases
When there is a shortage, a higher price ______ the quantity demanded and _____ the quantity supplied to eliminate the shortage
increases, decreases
When there is a surplus, a lower price _______ the quantity demanded and _______ the quantity supplied to eliminate the surplus
increases, increases
An increase in demand _____ the equilibrium price, and ______ equilibrium quantity
reduces, reduces
A decrease in demand ______ the equilibrium price, and ______ equilibrium quantity
reduces, increases
A increase in supply ______ equilibrium price, and _______ equilibrium quantity
increases, reduces
A decrease in supply ______ equilibrium price, and ______ equilibrium quantity
increase, decrease
If both supply and demand increase, then the equilibrium quantity will ________. If supply shifts more than demand, the equilibrium price will _______
increase, increase
If both supply and demand increase, then the equilibrium quantity will ________. If demand shifts more than supply, the equilibrium price will _______
decrease, decrease
If both supply and demand decline simultaneously then equilibrium quantity will ______. If demand decreases more than supply, the equilibrium price will ________
decrease, increase
If both supply and demand decline simultaneously then equilibrium quantity will ______. If supply declines more than demand, the equilibrium price will ________
Decrease. increases
If supply increases and demand decreases simultaneously, then equilibrium price will ______. If the decrease in demand is more than the increase in supply, the quantity _______
Decrease. decreases
If supply increases and demand decreases simultaneously, then equilibrium price will ______. If the decrease in demand is less than the increase in supply, the quantity ______
Increase, decrease
If supply decreases while demand increases then price will _____. If the decrease in supply is more than the increase in demand, then equilibrium quantity will ______
increase, increase
If supply decreases while demand increases then price will _____. If the increase in demand is more than the increase in demand, then equilibrium quantity will _______.
price ceiling
A government price control that sets the maximum allowable price for a good
price floor
A government price control that sets the minimum allowable price for a good
to help consumers in situations where the government thinks that the equilibrium price is too high
What's the purpose of a price ceiling?
to help suppliers of good and services in situations where the government feels that the equilibrium price is "too low"
What's the purpose of price floors?
shortages, long lines for goods, black markets, reduction in quality of goods
What are side effects of price ceilings?
more (shortage)
When there are price ceilings, the quantity demanded is more or less than the quantity supplied?
more
When there are price floors, the quantity supplied is more or less than the quantity demanded?
higher
For price floors to effect the market, they have to be _____ than the equilibrium price
lower
For price ceilings to effect the market, they have to be _____ than the equilibrium price
Cause surpluses, productivity problems.
What are the side effects of price floors?
quantity demanded, price of that good
The price elasticity of demand is the percentage change in the ____________ of a good divided by the percentage change in the ______ of that good
quantity demanded, price.
The price elasticity of demand is a measure of the sensitivity of the _________ of a good to the ______ of the good
large
If the price elasticity of demand for contact lenses is high, than the quantity of contact lenses demanded by people changes by a ____ amount when the price changes
small
If the price elasticity of demand for bread is low, than the quantity of bread demanded changes by a _____ amount when the price of bread changes
very
if there's a relatively flat line, this shows that the quantity demanded is ______sensitive to the price
high
If there's a demand curve with a relatively flat curve, then there is a _____ price elasticity of demand
low
If the demand curve is more vertical, then there is a ___ price elasticity of demand
price x quantity
How do you find total revenue?
steeper
The ______ the demand curve, the more inelastic the demand
Elastic
If a product has several substitutes, then an increase in price will lead to a relatively large decrease in quantity demanded as consumers switch to substitutes, implying a relatively _______ demand
Inelastic
If a good does not have many substitutes, a price change does not change quantity demanded very much, implying a relatively ________ demand.
Elastic
The greater the share of your income spent on a good, the more [elastic or inelastic] the demand?
Because a small percentage increase in price can take a big bite out of a household's discretionary income and cause the household to reconsider how they will spend their money
Why would a greater share of income spent on a good mean the demand for that good is elastic?
elastic
The longer a price change is in place the more _____ demand is
As time passes, it is more likely that a substitute can be found for the good.
Why does a longer price change in place make demand more elastic?
decrease
If demand is elastic, a price increase will correlate with a ______ in industry revenue
increase
If demand is inelastic a price increase will correlate with an ________ in industry revenue
fixed resources, fixed technology
What are the assumptions of the PPF?
elasticity equals to zero
Perfect in-elasticity
elasticity between zero and one
Relative inelasticity
elasticity equal to one
unitary elasticity
elasticity greater than one and less than infinity
relative elasticity
elasticity equal to infinity
perfect elasticity
inelastic, increase
If a one percent change in price causes less than a one percent decline in quantity demanded, then demand is relatively ________ and the price change will cause an _______ in the industry's total revenue
elastic, decrease
If a one percent change in price corresponds with a greater than one percent change in quantity demanded, then demand is relatively _______ and the price change will cause a _____ in industry total revenues
decrease
When demand is relatively elastic, price increases lead to a ________ in total revenue
do not cause
When demand is unitary elastic price increases _______ changes in total revenue
normal, inferior
Whether or not the income elasticity of demand is positive or negative depends upon whether the product is ______ or ______
normal
If the income elasticity of demand is positive, the good is _______
inferior
If the income elasticity of demand is negative, the good is inferior
Substitutes
If the cross-price elasticity is positive, the two goods are _______
Complements
If the cross-price elasticity is less than zero then the two goods are ______
positive
The price elasticity of supply is _____ because the law of supply implies a _____ relationship between price and quantity supplied
perfectly inelastic
If the price elasticity of supply is zero, supply is _____
relatively inelastic
If the price elasticity of supply is between zero and one, supply is
unitary elastic
If the elasticity of supply equals one, then supply is
relatively elastic
If the elasticity of supply is greater than one, supply is considered
perfectly elastic
If elasticity of supply is infinite, supply is
technology used to produce the good and length of time during which the price change is in place
Two things affect the price elasticity of supply
some technology is impossible to replicate
Why does technology affect the elasticity of supply?