Eco week 3

Factors that cause an Increase (rightward or downward shift) In supply:

1. A decrease in the cost of materials, labor, or other inputs used in the pro- duction of the good or service. 2. An improvement in technology that reduces the cost of producing the good or service. 3. An improvement in the weather (especially for agricultural products). 4. An increase in the number of suppliers. 5. An expectation of lower prices in the future. When these factors move in the opposite direction, supply will shift left.

If the price of milk is four dollars per gallon how many gallons per day are consumers willing to purchase?

3000

If a local art museum announces that it is going to lower the cost of admission into the museum next month then they should lead to

A decrease in the current demand for admission into the art museum

A change in the quantity supplied is represented by

A movement along the supply curve

A change in the quantity supplied refers to

A movement along the supply curve

If the demand for wine increases as people's incomes go up then wine is

A normal good

When we speak of a change in demand this means

A shift in the entire demand curve

A change in supply means

A shift in the entire supply curve

Who invented the supply and demand model?

Alfred Marshall

The market for a good consist of

All of the buyers and sellers of that good

If the government imposes a price ceiling of two dollars per gallon on milk and then this will lead to an access

Demand of 4000 gallons per day. Because if the price of milk is two dollars per gallon, the quantity supplied is 3000 and the quantity demanded is 7000, implying in excess demand of 4000 gallons per day

In a free market economy

People decide for themselves which careers to pursue in which products to produce or buy

A price ______________ Is a maximum allowable price specified by law

Price ceiling

A movement along the demand curve represents a change in

Quantity demanded

As pizza becomes more expensive a consumer me switch to chicken sandwiches, hamburgers, or other Foods that substitute for pizza this is called what

Substitution effect

Suppose that as the price of pencils increases people by fewer pencils instead use pants. The resulting reduction in the Quantity of pencils demanded is known as the

Substitution effect

The change in the quantity demand of a good that results because buyers switch to or from substitutes when the price of a good changes is known as the

Substitution effect

A shift in the supply curve represents a change in

Supply

When a new technology reduces the cost of production,

Supply shifts right causing equilibrium price to fall and equilibrium quantity to rise

When we speak of a change in quantity demanded this means

The change in the quantity that people wish to buy that occurs in response to a change in price

Cost benefit effect, the benefit is

The highest dollar amount he'd be willing to pay for the good

What is a market

The market for any good consist of all the buyers and sellers of that good. So, for example, the market for pizza on a given day in a given place is just a set of people potentially able to buy or sell pizza at that time and location

The supply curve is a schedule or graph that shows

The quantity of a good that sellers wish to sell at each price

Market equilibrium

The situation in which all buyers and sellers are satisfied with the respective quantities at the market price, occurs at the intersection of the supply and demand curves

A leftward shift in a supply curve can also be viewed as a

Upward shift in the same curve

Which of the following is likely to lead to an increase in the supply of pumpkins?

Weather that is beneficial to the pumpkin crop. A decrease in the cost of growing pumpkins.

If Jason's reservation price for a pound of apples is $1.40, in the market price for a pound of apples is $1.52 then Jason

Will not buy a pound of apples

the demand shift causes

a decline in equilibrium quantity

buyer's surplus

is the difference between his reservation price and the price he actually pays.

seller's surplus

is the difference between the price she receives and her reservation price.

A regulation that prevents the price of a good from reaching its equilibrium level un- necessarily prevents exchanges of this sort from taking place, and in the process

reduces total economic surplus

total surplus

the sum of the buyer's surplus and the seller's surplus.

Suppose Martin just bought a guitar from Jackson off Craigslist for $110. Martin's reservation price was $140, and Jackson's reservation price was $100. The buyer's surplus from this transaction was 30 dollars.

$30 because 140-110=30

The introduction of rent controls could lead to

. A decrease in the quantity of apartments available for rent .Lower rent for those who live in rent controlled apartment

Relative to the summer months, consumers have less exposure to the sun than during the winter. Thus relative to the summer, we would expect

. The demand for sunscreen to be lower in the winter . The amount of sunscreen bought and sold in the market will be lower in the winter .The price of sunscreen to be lower in the winter

Which will a sellers reservation price generally be equal to?

. The smallest dollar amount for which a seller would be willing to sell an additional unit . The marginal cost of producing another unit of the good

If bagels and cereal are substitutes, then a decrease in the price of bagels will lead to

A decrease in the demand for cereal

Which of the following is likely to lead to a decrease in the current supply gold

An announcement that makes suppliers believe that gold prices are going to increase next year

Which of the following factors will lead to a decrease in supply?

An expectation of higher prices in the future.

If butter and popcorn are complements, then a decrease in the price of butter will lead to

An increase in the demand for popcorn

If Hulu plus and Netflix are substitutes, then an increase in the price of Netflix should lead to

An increase in the price of Hulu plus An increase in the number of people who subscribe to Hulu plus

Economist define goods as substitutes if

An increase in the price of one causes a Righteard shift in the demand curve for the other

Two goods ( like a tennis and a tennis court) Are complements if

An increase in the price of one good, leads to a decrease in the demand for the other

Two goods are substitutes if

An increase in the price of one good, leads to an increase in the demand for the other

The largest dollar amount that a buyer is willing to pay for a good is the

Buyers reservation price

A shift in the demand curve represents a change in

Demand

A graph showing a slope going downwards represents a

Demand curve

A schedule or graph showing the quantity of a good that buyers wish to buy at each price is known as

Demand curve

When rents are prohibited from rising to the equilibrium level the result is

Excess demand in the housing market

Suppose there is a potential buyer whose reservation price for an additional slice of pizza is $4 and a potential seller whose reservation price is only $2.

If this buyer purchases a slice of pizza from this seller for $3, the total surplus generated by this exchange is $4 - $2 = $2, of which $4 - $3 = $1 is the buyer's surplus and $3 - $2 = $1 is the seller's surplus.

the supply shift causes

Increase in equilibrium quantity.

A buyers reservation price is the

Largest dollar amount the buyer would be willing to pay for a good

When input prices rise, supply shifts

Left, causing equilibrium price to rise and equiibrium quantity to fall

Cost benefit, the cost

Of the good is the actual amount that the buyer actually must pay for it which is the market price of the good

The equilibrium Price and equilibrium quantity of a good or the price and quantity at which the supply and demand curves for the good does what

They intersect

When input prices fall, supply shifts right, causing equilibrium price to fall and equilibrium quantity to rise

True

Economic efficiency occurs when

all goods and services are produced and consumed at their socially optimal levels.

A medical breakthrough that decreases the cost of treating cancer should lead to ____________ in the supply of cancer treatments.

an increase

If the price of sugar falls, this is like to lead to __________ in the supply of candy.

an increase

If a late frost damages a part of this year's orange crop, this should lead to:

an increase in the price of oranges. If a late frost damages the orange crop, this should lead to a decrease in the supply of oranges (a leftward shift in the supply curve), thereby increasing the price and decreasing the number of oranges bought and sold in the market. .decrease in the number of oranges bought and sold in the market. If a late frost damages the orange crop, this should lead to a decrease in the supply of oranges (a leftward shift in the supply curve), thereby increasing the price and decreasing the number of oranges bought and sold in the market.

Given that paper is made from wood, a decrease in the price of wood should:

decrease the price of paper. increase the quantity of paper bought and sold in the market.

Given that flour is an important input to bread, an increase in the price of flour should lead to:

decrease the quantity of bread bought and sold in the market. increase the price of bread.

Failure to achieve economic efficiency means that:

everyone in the economy could be made better off. total economic surplus is not maximized.

You observe that the price of ice cream has gone up and that less ice cream is being bought and sold. The best explanation for this is that the

supply of ice cream has decreased.

Suppose the demand for gasoline increases at the same time the supply of gasoline falls, then we know that

the equilibrium price and quantity of gasoline will go down.

An increase in the price of cotton is likely to shift the supply curve for clothing (that uses cotton as an input) to

the left.

The socially optimal quantity is

the quantity of a good that maximizes the total economic surplus that results from producing and consuming the good.

Total surplus is

v the difference between the buyer's reservation price and the seller's reservation price.

Factors that cause an Increase (rightward or upward shlft) In demand:

1. A decrease in the price of complements to the good or service. 2. An increase in the price of substitutes for the good or service. 3. An increase in income (for a normal good). 4. An increased preference by demanders for the good or service. 5. An increase in the population of potential buyers. 6. An expectation of higher prices in the future.

What is it called when a consumer simply can't afford to buy as many slices of pizza at higher prices as at lower prices

Income effect

Along a supply curve if the price of butter increases, the quantity of butter supplied will

Increase

The change in the quantity demanded of a good that results because a change in the price of a good changes the buyer is purchasing power is known as the

Income effect

Which of the following factors will lead to an increase in the demand for a good?

A decrease in the price of a complement An expectation of higher prices in the future

If people who currently own homes learn that home prices are likely to go up in their area next year, then this should lead to _________ in the current supply of homes.

A decrease. If people believe that home prices are going to go up next year, this may lead them to delay selling their homes for a year, thereby decreasing current supply.

Suppose that as the price of movie tickets increases, people stop going to the movies as often because they can no longer afford to do so. This reduction in the quantity of movie tickets demanded is known as the

Income effect