Ch 4 Quiz and Vocab

the law of demand is based on two phenomena

1) at lower prices, existing demanders buy more, 2) at lower prices, new demanders (some all-or-nothing demanders) enter the market.

shift factors of demand

1) society's income 2) the prices of other goods 3) tastes 4) expectations 5) taxes and subsidies

Which of the following is not held constant as you move alone the demand curve?

The price of that good

equilibrium

a concept in which opposing dynamic forces cancel each other out

Which of the following would be expected to cause the quantity of wool supplied to decrease?

a decrease in the price of wool

supply curve

a graphical representation of the relationship between price and quantity supplied

Graphically, a change in price causes

a movement along a given supply curve, not a shift

supply

a schedule of quantities a seller is willing to sell per unit of time at various prices, other things constant.

demand

a schedule of quantities of a good that will be bought per unit of time at various prices, other things constant

quantity demanded

a specific amount that will be demanded per unit of time at a specific price, other things constant

quantity supplied

a specific amount that will be supplied at a specific price, other things constant

Which of the following is not likely to change the supply of personal computers

an increase in consumer's incomes

Which of the following would likely result in an increase in the demand for beef?

an increase in family incomes

The explanation for the law of demand involves

consumers' ability to substitute different goods

According to the law of demand an increase in the price of gasoline will

decrease the quantity demanded of gasoline, other things constant

Price tends to be in equilibrium where supply and demand intersect because when quantity supplied

equals quantity demanded, prices don't change

When quantity supplied is greater than quantity demanded, prices tend to

fall

Suppose farmers can use their land to grow either wheat or corn. The law of supply predicts that an increase in the market price of wheat will cause

farmers to substitute wheat for the production of corn

When the wage rate paid to labor is above equilibrium, the

number of workers seeking jobs exceeds the number of jobs available

If quantity supplied exceeds quantity demanded, there is a tendency for

price to fall to restore equilibrium

law of demand

quantity demanded rises as price falls, other things constant. also can be stated as: quantity demanded falls as price rises, other things constant

If the price of steel rises, the law of supply predicts that other things constant, the

quantity supplied of steel will increase

law of supply

quantity supplied rises as price rises, other things constant. also can be states as: quantity supplied falls as price falls, other things constant

excess demand

situation when quantity demanded is greater than quantity supplies

excess supply

situtation when quantity supplied is greater than quantity demanded

According to the law of supply

supply curves slope upward

equilibrium quantity

the amount bought and sol at the equilibrium price

fallacy of composition

the false assumption that what is true for a part will also be true for the whole

demand curve

the graphic representation of the relationship between price and quantity demanded

shift in supply

the graphical representation of the effect of a change in a factor other than price on supply

movement along a demand curve

the graphical representation of the effect of a change in price on the quantity demanded

movement along a supply curve

the graphical representation of the effect of a change in price on the quantity supplied

shift in demand

the graphical representation of the effect of anything other than price on demand

market demand curve

the horizontal sum of all individual demand curves

market supply curve

the horizontal sum of all individual supply curves. Also: horizontal sum of all the firms marginal cost curves, taking account of an changes in input prices that might occur

equilibrium price

the price toward which the invisible hand drives the market

The law of demand states that the quantity demanded of a good is inversely related to the price of that good. Therefore, as the price of a good goes

up, the quantity demanded goes down

The law of supply states that, other things equal, as the price of a good goes

up, the quantity supplied goes up

The use of a the phrase "other things constant" in supply and demand analysis indicates that

we are considering changes in just one factor