Chapter 3: Supply and Demand

In economics, the demand for a good refers to the amount of the good that people:

will buy at various prices

After widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada, the likely economic effect on the U.S. demand curve for beef from Canada is:

a shift of the demand curve for beef to the left

The demand schedule for a good

indicates the quantities that will be purchased at alternative market prices.

Economists refer to the relationship that a higher price leads to a lower quantity demanded as the _____________.

law of demand

If a firm faces ________________________, while the prices for the output the firm produces remain unchanged, a firm's profits will increase.

lower costs of production

When economists talk about supply, they are referring to a relationship between price received for each unit sold and the

quantity supplied

__________ refers to the total number of units that are purchased at that price.

supply

A drought decreases the supply of agricultural products, which means that at any given price a lower quantity will be supplied; conversely, especially good weather would shift the

supply curve to the right

But nearly all supply curves share a basic similarity: they slope _______________.

up from left to right

Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect:

Andy's demand for beer will increase

If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that:

Goods X and Y are complement goods

Interpret the following statement: "An increase in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market."

The statement is correct

A change in price of a good or a service typically causes ______ for that specific good or service

a change along the supply curve

Any given demand or supply curve is based on the ceteris paribus assumption that ___________________.

all else is held equal

The term "ceteris paribus" means that:

all variables except those specified are constant.

The nature of demand indicates that as the price of a good increases:

buyers desire to purchase less of it

The ____ is the only price where quantity demanded is equal to the quantity supplied.

equilibrium price

If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as

excess demand

The demand curve for a typical good has a

negative slope because some consumers switch to other goods as the price rises.

A severe freeze has once again damaged the Florida orange crops. The impact of the market for orange juice will be a leftward shift

of the supply curve

________ are enacted when discontented sellers, feeling the prices are too low, appeal to legislators to keep prices from falling

price floors

The downward slope of the demand curve again illustrates the pattern that as _____________ rises, _________________ decreases.

price, quantity demanded

A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and ______, shown on the horizontal axis

quantity

The demand curve shows the relationship between price and:

quantity demanded

_______ refers to the total number of units that are purchased at that price

quantity demanded

A report surfaced lately that President Obama has given the order to federal agents to "round up" farm workers that have illegally entered the U.S. and deport them. The impact of this order on the market for vegetables will be a leftward shift of:

the supply curve

If new manufacturers enter the computer industry, then (ceteris paribus):

the supply curve shifts to the right

According to the law of supply

there is a direct relationship between price and quantity supplied