Econ 101 ch. 1, 2, 3

To determine whether a particular good is a normal good, a luxury good, or an inferior good, you would want to observe what happens to demand for the good when __________ changes.

income

The law of supply says that higher prices tend to _____ the quantity supplied of a good or service, assuming no other changes.

increase

The income and wealth gap in the United States has

increased in recent years.

A higher price simultaneously __________ the quantity supplied and __________ the quantity demanded, thus reducing the amount of excess __________.

increases; decreases; demand

In the short run, the quantity of available hotel rooms is not particularly responsive to changes in price because hotels take time to build and to destroy. This implies that the short-run supply of hotel rooms is

inelastic.

The law of demand

is a general tendency.

Households are generally buyers in the markets for products and sellers in ________ markets.

labor

Top-down management of an economy by the government has consistently

led to low rates of economic growth.

Over the past 30 years, most countries have moved toward

less government regulation of the economy.

Sale prices mean that the price is lowered for a _________ period of time.

limited

Inferior goods are characterized by _____ demand as a result of increased income. higher

lower

Governments generally take responsibility for

making sure the economy remains healthy.

The gap between quantity supplied and quantity demanded is usually closed over time by the

market mechanism.

What caused the decline in demand for Red Delicious apples?

Consumers found them to be tasteless.

Which of the following is NOT an example of an advance purchase discount?

Buying a soda at the local fast-food outlet.

How might a government cause a demand shift to the right?

By requiring consumers to purchase certain products.

What phrase do economists use to describe the assumption that everything else about a situation stays the same, while one variable, such as price, changes?

Ceteris paribus.

The selling prices of houses in 2003 through 2006 reflected which market condition

Excess demand.

Deregulation in the United States began with what industry in the 1970s?

Interstate trucking.

Which of the following countries is NOT among the 10 largest economies in the world?

Israel.

Most people have _______ feelings about the financial markets.

mixed

The market price can sometimes be difficult to identify due to which of the following

Sale prices, negotiated prices, and volume discounts.

Chinese leader Deng Xiaoping began what process in the 1980s?

Shifting away from a centralized economy.

Which of the following is part of the U.S. government's economic safety net?

Social Security.

The textbook says that which of the following is among the key forces shaping today's economy?

The evolution of financial markets.

A market demand schedule for hamburgers would NOT include which of the following?

The labor market.

If the quantity demanded increases sharply when the price drops, this illustrates what principle?

The law of demand.

Which of the following is presented in the text as an issue about which reputable economists might disagree?

Whether the government should provide more scholarship funds.

An increase in oil prices may cause

a reduction in the quantity of oil demanded.

Because of global warming, countries that are cooler may see ________ in the supply of grain and agricultural products.

a shift to the right

Closed economies generally do ______ open economies, in the long run. slightly better than

worse than

If supply is inelastic, then a demand shift will have a ____ effect on _______ than on quantity.

bigger; price

The individual quantity demanded is the amount the _____ is willing to _____ at a given price.

buyer, purchase

The demand schedule is a description of the behavior of _____ in a market.

buyers

A demand shift affects

buyers' willingness to purchase at various prices.

Eventually, reduced-price hotel rooms will ______ the supply of hotel rooms in a market.

decrease

If interest rates go up for a given product, quantity demanded will

decrease.

When a demand curve shifts to the right,

demand increases, equilibrium price increases, and equilibrium quantity increases.

If you wished to sell glasses of lemonade, but were uncertain at what price to sell each glass, you would use a __________, if one were available, to assist in the decision.

demand schedule

The demand curve is the graphical counterpart to the

demand schedule.

Suppose the government decides to eliminate some, but not all, of the rules that govern how investment banks conduct their business. This would be an example of

deregulation.

The demand schedule reports the quantity demanded at

different prices.

A supply schedule illustrates the quantity supplied at

different selling prices.

The law of demand suggests that most demand curves will be

downward-sloping.

The most consistent force for economic growth and progress is

economic competition.

Government action can cause a shift in

either supply or demand.

Most markets, if left alone, will tend toward

equilibrium price.

On the basic supply-demand graph, where the demand curve and supply curve intersect is known as the

equilibrium price.

The price at which the quantity supplied equals quantity demanded is the

equilibrium price.

The price at which the quantity supplied equals the quantity demanded is the

equilibrium price.

In economics, satiation means

eventually the marginal value of the good consumed decreases.

If supply increases, equilibrium price

falls.

Nuclear power in the United States turned out to be

far more expensive and troublesome than expected.

Poorer countries started to develop economically when they

figured out what the rest of the world wanted, and responded.

By total economic output (gross domestic product), the United States ranks as the ______ largest economy in the world. first

first

Natural resources, such as crude oil and fish, are often sold in __________ markets.

global

Markets can be

global, national, and local.

Globalization is the exchange of ________________ among countries.

goods, services, ideas, and people

Generally speaking, in the law of demand, the lower the price, the ________ the quantity demanded.

greater

Higher income usually means

higher demand.

A demand shift to the right generally leads to

higher prices and higher output.

The influx of inexpensive, reliable cars from Japan in the 1980s forced domestic producers to

improve the reliability and cost of their cars.

The financial markets do NOT include which of the following?

Nonprofit organizations.

In 2009 the gross domestic product of the United States was

14.1 trillion.

The top _____% of U.S. households earn more than half of the country's income.

20

Renewable energy sources provided _____% of U.S. needs as of 2009.

8

Movies delivered over the Internet might have what effect on movie theaters?

A demand shift to the left.

What might happen if the market price of haircuts went up?

A hair salon might hire more stylists.

Which of the following is not an example of zero price?

A hot dog at a stand.

How does a lower price alleviate the problem of excess supply?

A lower price decreases the number of potential sellers and increases the number of potential buyers.

For which pair of goods below would an increase in income have the same effect on both goods?

A normal good and a luxury good.

The number of markets is

Always changing.

In 2004, the worldwide demand curve for cement moved to the right. What does this mean

At any price, the quantity demanded was higher.

Which is NOT an example of inelastic supply?

Bottled water.

Which of the following does NOT explain why there are so many disagreements among economists?

In some cases, economists have simply not investigated the issue at hand.

Which of the following countries have better retirement benefits and more job security than the United States?

France and Germany.

The textbook says that which of the following is among the key forces shaping today's economy?

Globalization.

Which of the following is NOT mentioned in the textbook as a constraint that affects the economy?

Households are limited in what they can purchase by government regulations.

Economics competition can have which of the following negative effects on a domestic economy?

It drives down wages and profits.

Buying a used textbook from a fellow student is an example of what type of market?

Local.

If the average market price for haircuts increases, all else equal, which of the following is LEAST likely to occur as a result?

Many salons will go out of business.

Which of the following is an example of a product that is sold primarily in a local market?

Milk.

Which of the following is NOT part of an economy's financial market

Political action committees.

What would it mean if a demand curve sloped upward?

Quantity demanded increases as the price increases

If a frost suddenly destroyed a big portion of the orange crop, a good with highly elastic demand, what would be the impact on quantity demanded and price?

Quantity demanded would decrease a lot, and price would remain stable or rise slightly.

Which of the following is probably NOT an example of a normal good?

Store-brand breakfast cereal.

The government provides what type of incentives to the housing industry in order to promote growth?

Tax-deductible interest.

Which of the following is NOT mentioned in the textbook as one of its three goals?

Teaching how to successfully invest money in the stock market.

The textbook says that which of the following is among the key forces shaping today's economy?

Technological change.

What is one reason why countries are more interconnected today?

Technology.

Which is not an example of government intervention in the economy?

The Brookings Institute.

Which of the following is not an example of a good provided by a market?

The air we breathe.

Which of the following is an example of technological change?

The personal computer.

Using the law of demand, what would generally happen if the price of gasoline were to rise to $7.00 per gallon?

The quantity demanded would decrease.

The average sale price of a home in the United States increased from $207,000 to $297,000 from 2000 to 2005. All else equal, we would expect that during the same time

The quantity of new homes supplied also increased.

If financial aid were severely reduced, what would happen to the equilibrium quantity of education supplied by educational institutions?

The quantity supplied would fall.

What is the price of labor in a market?

The wage rate.

Federal taxes have which of the following effects on the economy?

There is no definitive agreement on the effect.

What was the impact of "subprime" mortgages on the economy?

They increased defaults and caused large losses at financial institutions.

If the market price of $10 per lawn leads to the quantity supplied of 15 mowed lawns, and the market price of $15 per lawn leads to 25 lawns mowed, which way does the supply curve slope?

Upward.

Can economic competition be viewed as a positive force for growth and progress

Yes, as long as it is conducted within a fair set of rules.

Does the law of supply apply to labor markets?

Yes, because some workers who are less committed to the labor force, like teenagers, will decide to work if wages increase.

Hurricane Katrina caused refineries and oil rigs in New Orleans and in the Gulf of Mexico to close down. In the market for gasoline, Hurricane Katrina caused

a decrease in supply.

A failure in the mortgage lending sector could cause

a demand shift to the left in the housing market.

China and India have economically prospered recently by introducing

a more market-based economy.

After Hurricane Katrina, the supply curve for oil shifted to the left, and as a result

a new equilibrium price was reached.

For the United States, one important benefit of foreign trade is

access to cheaper goods and services.

Ceteris paribus, when used by economists, means

all other things equal.

In contrast to the law of supply, sometimes ______ can reduce the quantity supplied.

an increased price

Global markets consist of buyers and sellers

anywhere in the world.

A market supply schedule

combines the quantities supplied by all businesses in a market.

Opportunity cost is defined as the value or benefit of the

next best alternative.

Gross domestic product is

one of many indicators of prosperity, some of which are monetary, and some of which are nonmonetary.

When you give up the opportunity to do something else, the value to you of that activity is called

opportunity cost.

Market equilibrium is the point where quantity supplied and __________ are reasonably in balance.

quantity demanded

Between 2000 and 2007, many more U.S. furniture stores purchased their furniture from Chinese manufacturers. As a result, the supply curve for furniture

shifted to the right.

Deregulation is the process of _________ government control over industries.

reducing

An increase in supply is shown graphically as a __________ shift of the supply curve, and as a result of an increase in supply, equilibrium price will __________.

rightward; decrease

A luxury good is one whose demand ______ as income increases.

rises sharply

The market for automobiles in China has experienced tremendous growth primarily because of

rising incomes in China.

The typical worker is a(n) ________ in a labor market.

seller

Higher interest rates can cause the demand curve for cars to

shift to the left.

If a town begins requiring builders to build on one-acre lots, instead of smaller quarter-acre lots, the supply curve for new homes will

shift to the left.

After Hurricane Katrina, the supply curve for gasoline

shifted to the left.

In a movement along the demand curve, the demand schedule

stays the same, and the price changes.

Technological change has always been the critical factor in raising living standards, even going as far back as the development of the

steam engine

If a new major oil field is discovered in Africa, the world __________ curve for oil would shift to the __________.

supply; right

An example of a company that uses financial markets to raise money is

the Ford Motor Company.

One of the biggest benefits of a market-based economy is

the ability to adapt quickly to change.

One measurement of economic prosperity is

the gross domestic product.

A vertical supply curve would mean that

the price does not affect the quantity supplied.

Demand is inelastic if

the quantity demanded does not change very much even if the price changes dramatically.

The supply schedule is a description of

the relationship between quantities supplied and market prices.

The market for iPads did not exist 30 years ago because

the technology did not exist to produce iPads.

Supply and demand are examples of

the tools of economics.

The market price is

the typical price at which a good or service sells.

In a centrally planned economy, decisions are made by

top-level government officials.

Supply curves are generally

upward-sloping.

The gross domestic product is calculated by adding up the

value of all goods and services produced within the nation.

A laissez-faire economy has

very little government regulation of the economy.

Technological change is generally

very uneven.