ABE Chapter 4

In a competitive market, the quantity of a product produced and the price of the product are determined by

buyers and sellers.

The sum of all the individual supply curves for a product is called

market supply.

A group of buyers and sellers of a particular good or service is called a

market.

The highest form of competition is called

perfect competition.

A demand schedule is a table that shows the relationship between

price and quantity demanded.

When drawing a demand curve,

price is on the vertical axis and quantity demanded is on the horizontal axis.

When supply and demand both increase, equilibrium

price may increase, decrease, or remain unchanged.

Buyers and sellers who have no influence on market price are referred to as

price takers.

A market demand curve shows how the total quantity demanded of a good varies as

price varies.

Suppose the American Medical Association announces that men who shave their heads are less likely to die of heart failure. We could expect the demand for

razors to increase.

The market demand curve

represents the sum of the quantities demanded by all the buyers at each price of the good.

The quantity supplied of a good is the amount that

sellers are willing and able to sell.

When quantity demanded decreases at every possible price, we know the demand curve has

shifted to the left.

Ford Motor Company announces that next month it will offer $3,000 rebates on new Mustangs. As a result of this information, today's demand curve for Mustangs

shifts to the left.

A technological advance will shift the

supply curve to the right.

If the number of sellers in a market increases, then the

supply in that market will increase.

Wheat is the main input in the production of flour. If the price of wheat decreases, then we would expect the

supply of flour to increase.

A surplus exists in a market if

the current price is above its equilibrium price.

A shortage exists in a market if

the current price is below its equilibrium price.

Pizza is a normal good if

the demand for pizza rises when income rises.

Suppose that demand for a good decreases and, at the same time, supply of the good decreases. What would happen in the market for the good?

Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.

Suppose the number of buyers in a market increase and a technological advancement occurs also. What would we expect to happen in the market?

Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

A movement along a supply curve is called a change in supply while a shift of the supply curve is called a change in quantity supplied.

False.

A reduction in an input price will cause a change in quantity supplied, but not a change in supply.

False.

A surplus is the same as an excess demand.

False.

All goods and services are sold in perfectly competitive markets.

False.

An increase in demand shifts the demand curve to the left.

False.

An increase in the price of a product and an increase in the number of sellers in the market affect the supply curve in the same general way.

False.

At the equilibrium price, buyers have bought all they want to buy, but sellers have not sold all they want to sell.

False.

If there is an improvement in the technology used to produce a good, then the supply curve for that good will shift to the left.

False.

Ina competitive market, there are so few buyers and so few sellers that each has a significant impact on the market price.

False.

The demand curve is the upward-sloping line relating price quantity demanded.

False.

The law of demand states that, other things equal, when the price of a good rises, the quantity demanded of the good rises, and when the price falls, the quantity demanded falls.

False.

The law of supply states that, other things equal, when the price of a good rises, the quantity supplied of the good falls.

False.

When the market price is below the equilibrium price, suppliers are unable to sell all they want to sell.

False.

A movement along the supply curve might be caused by a change in

the price of the good or service that is being supplied.

A competitive market is one in which

there are so many buyers and so many sellers that each has a negligible impact on the price of the product.

The supply of a good or service is determined by

those who sell the good or service.

A monopoly is a market

with one seller, and that seller sets the price.

A change in the price of the good or service

would not shift the demand curve for a good or service.

A decrease in supply shifts the supply curve to the left.

True.

A decrease in supply will cause an increases in price, which will cause a decrease in quantity demanded.

True.

A market's equilibrium is the point at which the supply and demand curves intersect.

True.

A yard sale is an example of a market.

True.

An increase in demand will cause an increase in price, which will cause in an increase in quantity supplied.

True.

If a higher price means a greater quantity supplied, then the supply curve slopes upward.

True.

In a market economy, supply and demand determine both the quantity of each good produced and the price at which it is sold.

True.

In a market, the price of any good adjusts until quantity demanded equals quantity supplied.

True.

Individual demand curves are summed horizontally to obtain the market demand curve.

True.

Prices allocate a market economy's scarce resources.

True.

Supply and demand together determine the price and quantity of a good sold in a market.

True.

The quantity supplied of a good or service is the amount that sellers are willing and able to sell at a particular price.

True.

When a supply curve or a demand curve shifts, the equilibrium price and equilibrium quantity change.

True.

When quantity demanded exceeds quantity supplied at the current market price, the market has a shortage and market price will likely rise in the future to eliminate the shortage.

True.

Whenever a determinant of demand other than price changes, the demand curve shifts.

True.

Whenever a determinant of supply other than price changes, the supply curve shifts.

True.

the actions of buyers and sellers naturally move markets toward equilibrium.

True.

Tastes, expectations, and the prices of related goods

are determinants of demand.

"Other things equal, when the price of a good rises, the quantity supplied of the good also rises, and when the price falls, the quantity supplied falls as well." This relationship between price and quantity supplied

is referred to as the law of supply.

The quantity demanded of a good is the amount that buyers

are willing and able to purchase.

If a decrease in income increases the demand for a good, then the good is

an inferior good.

A leftward shift of a supply curve is called

a decrease in supply.

A decrease in demand is represented by

a leftward shift of a demand curve.

A decrease in supply is represented by

a leftward shift of a supply curve.

If the demand for a good falls when income falls, then the good is called

a normal good.

An increase in demand is represented by

a rightward shift of a demand curve.

The difference between a supply schedule and a supply curve is that

a supply schedule is a table and a supply curve is drawn on a graph.

The law of demand states that, other things equal,

an increase in price causes quantity demanded to decrease.

Two goods are substitutes when a decrease in the price of one good

decreases the demand for the other good.

If the number of buyers in a market decreases, then

demand will decrease.

If the demand for a product increases, than we would expect

equilibrium price and equilibrium quantity both to increase.

If the supply of a product increases, than we would expect

equilibrium price to decrease and equilibrium quantity to increase.

The unique point at which the supply and demand curves intersect is called

equilibrium.

If suppliers expect the price of their product to fall in the future, then they will

increase supply now.

Two goods are complements when a decrease in the price of one good

increases the demand for the other good.

The price of the inputs used to produce the good

is not a determinant of the demand for a particular good.