Economics ch. 3

If producers incorrectly set the price of their product too low:

a shortage will result.

Demand describes how much of something people:

are willing and able to buy under certain circumstances.

The most likely substitute good for hot dogs would be:

burgers.

In economic terminology, a buyer or seller who cannot affect the market price is called a:

price taker

Consider a market that is in equilibrium. If it experiences an increase in demand, what will happen?

The demand curve will shift to the right, and the equilibrium price and quantity will rise.

Consider a market that is in equilibrium. If it experiences both a decrease in demand and a decrease in supply, what can be said of the new equilibrium?

The equilibrium quantity will definitely fall, while the equilibrium price cannot be predicted.

The most likely substitute good for cereal would be:

a bagel.

A price taker is:

a buyer or seller who cannot affect the market price.

Ray's company just announced everyone will be getting their pay cut by 5% in order to avoid having to close down. Ray's demand for coffee, a normal good, will likely:

decrease, and his demand curve will shift to the left.

The law of supply describes the:

direct relationship between price and quantity supplied.

For almost all goods, the:

lower the price goes, the higher the quantity demanded.

The supply curve:

represents the relationship between price and quantity supplied with everything else held constant.

The term market refers to:

the buyers and sellers who trade a particular good or service, not to a physical location.

The supply curve is a __________ line that reflects the _______ relationship between price and quantity supplied.

upward-sloping; direct

Consider a market that is in equilibrium. If it experiences both an increase in demand and an increase in supply, what can be said of the new equilibrium?

The equilibrium quantity will definitely rise, while the equilibrium price cannot be predicted.

Suppose there is a bumper crop of apples this year. How might this affect the market for apples?

The supply would increase, decreasing equilibrium price and increasing equilibrium quantity.

One reason the supply of cell phones has increased is:

better technology allows them to be produced more cheaply.

Consider the market for ride-on lawn mowers and the recent increases in the price of oil. The recent increase in the price of oil makes it more expensive to manufacture ride-on lawn mowers. An increase in the price of oil also makes it more expensive to run a ride-on mower. If the price of oil increases, the demand for ride-on mowers will ______ and the supply will _______.

decrease; decrease

A standardized good or service is one:

for which any two units of it have the same features and are interchangeable.

A perfectly competitive market is one in which:

fully informed, price-taking buyers and sellers easily trade a standardized good or service.

The demand curve:

is a downward-sloping line that reflects the inverse relationship between price and quantity.

The city of Burlington gets very hot each summer and very cold each winter. We would expect:

the demand for lemonade to increase each summer and decrease each winter.

A recent epidemic of mad cow disease caused the government to mandate that thousands of cows be completely destroyed. This will likely cause:

the supply of leather shoes to decrease.

A surplus will occur in a market if:

there are not enough buyers.