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Chapter 3- Supply and Demand
economics- chapter 3
Terms in this set (77)
A free market is described by which of the following statements?
the government does not intervene in any way
In a planned economy, government determines the prices for goods and services, and
what goods will be produced
A competitive market is one in which
there is a large number of buyers and sellers
Market economies are based on private enterprise, which means
economic decision making happens through markets
Which country has characteristics of a command economy?
A change in price does not move the demand curve.It only shows a difference in the quantity demanded.
The demand curve will move left or right when there is an underlying change in demand at all prices.
The downward slope of a demand curve illustrates the pattern that as ________ decreases, ________ increases.
price; quantity demanded
If price was $1.40 per gallon and increased to $2.00 per gallon, how does quantity of gasoline demanded change?
600 million gallons to 460 million gallons
Two common ways to discourage tobacco use are taxes on tobacco and information campaigns on the hazards of tobacco use. Which one causes a shift in the demand curve for smoking?
information campaign on hazards of tobacco
According to the law of demand, assuming other factors are held constant
as the price of milk decreases the quantity of milk demanded will increase
Complete the following sentence: If people think that the price of televisions will decrease in the near future, that belief may cause a(n)
decrease in the demand for televisions today
A demand curve shows the graphical relationship between quantity demanded and
What would cause the level of demand (meaning the relationship between price and quantity demanded) to shift?
population grows in a particular market area
According to the law of supply, assuming other factors are held constant
as the price of milk decreases, the quality of milk supplied will decrease
A supply curve is a graphical illustration of the relationship between quantity supplied and
Recommended textbook explanations
Principles of Economics
N. Gregory Mankiw
Krugman's Economics for AP*
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Krugman's Macroeconomics for AP*
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Principles of Microeconomics
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Hotel rooms in Smalltown go for $100, and 1,000 rooms are rented on a typical day. a. To raise revenue, the mayor decides to charge hotels a tax of$10 per rented room. After the tax is imposed, the going rate for hotel rooms rises to $108, and the number of rooms rented falls to 900. Calculate the amount of revenue this tax raises for Smalltown and the deadweight loss of the tax. b. The mayor now doubles the tax to$20. The price rises to $116, and the number of rooms rented falls to 800. Calculate tax revenue and deadweight loss with this larger tax. Are they double, more than double, or less than double? Explain.
Jim buys only milk and cookies. a. In year 1, Jim earns $100, milk costs$2 per quart, and cookies cost $4 per dozen. Draw Jim’s budget constraint. b. Now suppose that all prices increase by 10 percent in year 2 and that Jim’s salary increases by 10 percent as well. Draw Jim’s new budget constraint. How would Jim’s optimal combination of milk and cookies in year 2 compare to his optimal combination in year 1?
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