Chapter 3

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The difference between a change in supply and a change in the quantity supplied is that the latter is

produced by a change in the product's own price while the former is caused by a variety of variables other than the product's price.

Consider the market for college textbooks. Suppose a recent economic recession has resulted in increased tastes for learning. Increased tastes for learning will shift

the demand curve for textbooks to the right.

Consumer surplus is

the difference between the highest price a consumer is willing to pay and the price the consumer actually pays.

Producer surplus is

the difference between the lowest price a firm would be willing to accept and the price it actually receives.

Consider the market for college textbooks. Suppose a recent economic recession has resulted in increased tastes for learning. The new equilibrium will be where

the new demand curve intersects the supply curve.

Consider the market for LCD TVs. Assume the market is perfectly competitive and at a​ market-clearing equilibrium. What area represents consumer​ surplus? What area represents producer​ surplus? Consumer surplus is equal to the area

under the demand curve and above the price for the units consumed.

What do economists mean by market​ equilibrium?

A market outcome where quantity supplied is equal to quantity demanded.

If a shortage exists in a​ market, we know that the actual price is

below the equilibrium​ price, and the quantity demanded is greater than the quantity supplied.

How does consumer surplus change as the equilibrium price of a good rises or​ falls? As the price of a good​ rises, consumer surplus

decreases

How does producer surplus change as the equilibrium price of a good rises or​ falls? as the price of a good​ falls, producer surplus

decreases

The price of Burger​ King's Whopper hamburger declines. This will cause

demand for​ McDonald's Big Mac hamburgers to decrease.

​McDonald's eliminates ​$1.00 off coupons. This will cause

a movement along the demand curve for​ McDonald's Big Mac hamburgers.

A good for which demand increases as income rises is​ ________, and a good for which demand increases as income falls is​ ________.

a normal​ good; an inferior good

If a surplus exists in a​ market, we know that the actual price is

above the equilibrium​ price, and the quantity supplied is greater than the quantity demanded.

Consider the market for LCD TVs. Assume the market is perfectly competitive and at a​ market-clearing equilibrium. What area represents consumer​ surplus? What area represents producer​ surplus? Producer surplus is equal to the area

above the supply curve and below the price for the units produced and sold.

What do economists mean when they use the Latin expression ceteris paribus​?

All else equal

The law of demand holds in the market for three​ goods, X,​ Y, and Z. An increase in the price of X causes an increase in the price of Y. A decrease in the price of X causes a decrease in the demand for Z. Which of the following conclusions is most strongly supported by the information given​ above?

Z is a substitute for input X in the production of Y.

How does consumer surplus change as the equilibrium price of a good rises or​ falls? as the price of a good​ falls, consumer surplus

increases

How does producer surplus change as the equilibrium price of a good rises or​ falls? As the price of a good​ rises, producer surplus

increases

Goods and services that can be used for the same purpose are​ ________, and goods and services that are used together are​ ________.

​substitutes; complements


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