ECON CHAPTER 3

Competitive Market Equilibrium:

A market equilibrium WITH MANY buyers and sellers.

Supply curve:

A CURVE that shows that relationship between the relationship between the price of a product and the quantity of the product supplied.

An INCREASE in the PRICE of an input decreases the profitability of selling the good, causing a _______________ A- increase in supply B- decrease in supply C- no change in supply

An INCREASE in the PRICE of an input decreases the profitability of selling the good, causing a B- DECREASE in supply

An expected decrease in the price tomorrow ______________. A- increase demand tomorrow B- decrease demand tomorrow C- increase demand today D- decrease demand today

An expected decrease in the price tomorrow: D- decrease demand TODAY

Complements:

Complements: Goods and services that are consumed TOGETHER. ei: big mac + fries / hot dogs + hot dog buns / left shoe + right shoe

Inputs:

Things used in the production of a good or service.

Change in QUANTITY SUPPLIED

A change in the PRICE of the product being examined causes a movement ALONG the supply curve.

Technological Change:

A firm may experience a positive or negative change in its ability to produce a given level of output with a given quantity of inputs.

A movement ALONG the demand CURVE for the toothpaste would be caused by: A- a change in the price of toothbrushes B- a change in consumer income C- a change in the price of toothpaste D- a change in population

A movement ALONG the demand CURVE for the toothpaste would be caused by: C- a change in the price of toothpaste.

A change in something OTHER THAN PRICE that affects the ENTIRE supply curve shift. A shift to the LEFT is ______________

A shift to the LEFT is a decrease.

A change in something OTHER THAN PRICE that affects supply causes the ENTIRE supply curve to shift. A shift to the RIGHT is ________________

A shift to the RIGHT is an increase.

Market Equilibrium:

A situation in which quantity demanded EQUALS quantity supplied.

An expected increase in the price tomorrow __________________. A- increase demand tomorrow B- decrease demand tomorrow C- increase demand today D- decrease demand today

An expected increase in the price: C- increase demand TODAY

Change in SUPPLY

Any other change affecting supply causes the ENTIRE SUPPLY curve to SHIFT.

Population and Demographics:

Increases in the number of people buying something will INCREASE the amount demanded.

Inferior Goods:

Inferior Goods: Goods for which the demand DECREASES as income rises, and increase as income falls. ei: second-hand clothing / ramen noodles

Ceteris Paribus ("all else equal") Condition:

The requirement that when analyzing the relationship between TWO variables-such as price and price quantity demanded- other variables must be held CONSTANT.

Law of Demand:

The rule that, holding everything else constant, when the price of a product falls, the quantity demanded of the product will INCREASE + when the price of a product rises, the quantity demanded of the product will DECREASE.

The Law of Supply:

The rule that, holding everything else is CONSTANT, increases in price causes increases in the quantity supplied + decreases in price decreases in the quantity supplied. **Supply curves slope upward

Which of the following will shift the demand curve for a good? A- a change in the technology used to produce the good B- an increase in the price of the good C- a decrease in the price of a complementary good D- a decrease in the price of the good

Which of the following will shift the demand curve for a good?? C- a DECREASE in the price of a COMPLEMENTARY good

Change in DEMAND:

Any other change affecting demand cause the ENTIRE DEMAND CURVE to SHIFT.

Consumers decide ________ products to buy AND ______ to buy them. A- which / when B- how much / when C- fun / when D- less / when

Consumers decide WHICH products to buy & WHEN to buy them.

If an increase in income leads to a decrease in the demand for popcorn, then popcorn is: A- an inferior good B- a necessity C- a neutral good D- a normal good

If an increase in income leads to a decrease in the demand for popcorn, then popcorn is: A- inferior good

Demand Curve:

A CURVE that shows the relationship between the price of a product and the quantity of the product demanded.

A DECREASE in the PRICE of an input increases the profitability of the selling the good, causing a ____________ A- increase in supply B- decrease in supply C- no change in supply

A DECREASE in the PRICE of an input increases the profitability of the selling the good, causing a A- INCREASE in supply

What does a LEFT shift on the demand curve mean?

A LEFT shift on the demand curve means a DECREASE IN DEMAND.

What does a RIGHT shift on the demand curve mean?

A RIGHT shift on the demand curve means an INCREASE IN DEMAND.

Demand Schedule:

A TABLE that shows the relationship between the price of a product and the quantity of the product demanded.

Supply Schedule:

A TABLE that shows the relationship between the price of a product and the quantity of the product supplied.

Change in QUANTITY DEMANDED:

A change in PRICE of the product being examined causes a movement ALONG the DEMAND CURVE.

Future products are ______________ for current products. A- inferior goods B- substitutes C- complements D- normal goods

Future products are SUBSTITUTES for current products.

If a firm anticipates the price of its product will be HIGHER in the future, it might ________ its supply TODAY in order to INCREASE it in the future.

If a firm anticipates the price of its product will be HIGHER in the future, it might *DECREASE* its supply TODAY in order to INCREASE it in the future.

Tastes:

If consumers' tastes change, they may buy MORE or LESS of the product.

Income of consumers:

Increase in income increases demand if product is NORMAL, decreases demand if product is INFERIOR.

Price of related goods

Increase in the price of related good increases demand if products are SUBSTITUTES, decrease demand if products are COMPLEMENTS.

Normal Goods:

Normal Goods: Goods for which the demand INCREASES as income rises, and decreases as income falls. ei: clothing / restaurant meals / vacatiosn

Substitutes:

Substitutes: Goods and services that can be used for the SAME purpose. ei: big mac + wopper / jeans + khakis / iphone + samsung

The Law of Demand implies, holding everything else CONSTANT, that: A- as the PRICE of bagels increase, the QUANTITY of bagels demanded will decrease. B- as the PRICE of bagels increase, the DEMAND of bagels will decrease. C- as the PRICE of bagels increase, the QUANTITY of bagels demanded will increase. D- as the PRICE of bagels increase, the DEMAND for bagels will increase.

The Law if Demand implies, holding everything else CONSTANT, that: A- as the PRICE of bagels increase, the QUANTITY of the bagels demanded will decrease.