Economics Today The Macro View Ch.3 Homework

If more buyers came into the market for a good, we would expect to see the market demand curve.

Shift outward and to the right.

The law of _____ applies when other things, such as income and the price of all other goods and services, are held constant.

demand

There is normally a _______ relationship between price and quantity of a good supplied, other things being held constant.

direct

The relative price of a good is that price

expressed in terms of the price of another good.

The _____ curve normally shows a direct relationship between price and quantity supplied.

supply

The law of supply predicts the supply curve will be

upward sloping.

Which of the following would cause an increase in the supply of chicken?

A decrease in the price of inputs to chicken production.

Demand curve

A graphical representation of the demand schedule. It is negatively sloped line showing the inverse relationship between the price and quantity demanded (other than being equal).

Subsidy

A negative tax, a payment to a producer from the government, usually in the form of a cash grant per unit.

Demand

A schedule showing how much of a good or service people will purchase at any price during a specified time period, other things being constant.

Supply

A schedule showing the relationship between price and quantity supplied for a specified period of time, other things being equal.

Shortage

A situation in which quantity demanded is greater than quantity supplied at a price below the market clearing price.

Surplus

A situation in which quantity supplied is greater than quantity demanded at a price above market clearing price.

In the market for flash memory​ drives, indicate whether the following events would cause an​ "increase or a decrease in demand​" or an​ "increase or a decrease in the quantity demanded.​" A. There are increases in the prices of storage racks and boxes used to store flash memory drives. B. There is a decrease in the price of computer drives that read the information contained on flash memory drives. C. There is a dramatic increase in the price of secure digital cards that, like flash memory drives, can be used to store digital data. D.A booming economy increases the income of the typical buyer of flash memory drives(this is a normal good). E. Consumers of flash memory drives anticipate that the price of this good will decline in the future.

A. Decrease in Demand. -Equilibrium quantity would decrease. Equilibrium price would decrease. B. Increase in demand. -Equilibrium quantity would Increase. Equilibrium price would Increase. C. Increase in demand. -Equilibrium quantity would Increase. Equilibrium price would Increase. D. Increase in demand -Equilibrium quantity would Increase. Equilibrium price would Increase. E. Decrease in demand. -Equilibrium quantity would decrease. Equilibrium price would decrease.

Consider the market for economics text books. A.The market price of paper increased. B. The market price of economics textbooks increases. C. The number of publishers of economics textbooks increases. This will cause. D. Publishers expect that the market price of economics textbooks will increase next month.

A. Decrease in supply B. Increase in quantity supplied. C. Increase in supply D. Decrease in supply.

Market

All of the arrangements that individuals have for exchanging with one another. Thus, for example, we can speak of the labor market, the automobile market, and the credit market.

Ceteris paribus conditions

Determinants of the relationship between price and quantity that are unchanged along a curve. Changes in these factors causes the curve to shift.

Inferior good

Goods for which demand falls as income rises.

Normal goods

Goods for which demand rises as income rises. Most goods are normal goods.

Market demand

The demand of all consumers in the marketplace for a particular good or service. The summation at each price of the quantity demanded by each individual.

Supply curve

The graphical representation of the supply schedule; a line (curve) showing the supply schedule which generally slopes upward (has a positive slope) other things being equal.

Relative price

The money price of one commodity divided by the money price of another commodity; the number of units of one commodity that must be sacrificed to purchase one unit of another commodity.

Law of supply

The observation that the higher price of a good, the more of that good sellers will make available over a specified time period, other things being equal

Law of demand

The observation that there is a negative, or inverse, relationship between the price of any good or service and the quantity demanded, holding other factors constant.

Money price

The price expressed in today's dollars; also called the absolute or nominal price.

Market clearing or equilibrium, price

The price that clears the market, at which quantity demanded equals quantity supplied, the price where the demand curve intersects the supply curve.

Equilibrium

The situation when quantity supplied equals quantity demanded at a particular price.

Complements

Two goods are complements when a change in the price of one causes an opposite shift in the demand for the other.

Substitutes

Two goods are substitutes when a change in the price of one causes a shift in demand for the other in same direction as the price change

Any improvement in overall production technology that permits more output to be produces with the same level of inputs causes

a rightward shift of the supply curve so that more is offered at each price.

An increase in demand is shown graphically by

a shift of the demand curve to the right.

Assume that the cost of aluminium used by soft drink companies increases. Indicate which of the following statements describing the resulting effects in the market for soft drinks distributed in aluminium cans are True (T) or false (F).

a. The demand for soft drinks decreases. (F) b. The quantity of soft drinks demanded decreases. (T) c. The supply of soft drinks decreases. (T) d. The quantity of soft drinks supplied decreases. (F)

Whenever the price is _____ than the equilibrium price, there is an excess quantity supplied (a surplus)

above (greater)

The law of supply states that other things being equal,

as price increases, quantity supplied increases.

The law of demand states that

quantity demanded will vary inversely with the price of the good.

Whenever the price is _____ than the equilibrium price, there is an excess quantity demanded (a shortage)

below (less)

A change demand comes about only because of a change in the _____ _____ conditions of demand. This change in demand is a shift to the demand curve to the left or to the right

ceteris paribus

We measure demand schedule in terms of a time dimensions and in ______ quality units

constant

Demand curves are drawn with determinants other than the price of the good held constant. These other determinants, called ceteris paribus conditions are 1) _____ 2)_____ 3)_____ 4)_____ and 5)_____

income tastes and preferences prices of related goods: substitutes and complements expectations market size (number of potential buyers)

A shortage creates a situation that forces prices to ________ while a surplus creates a situation that forces prices to ________.

increase decrease

If a good is a normal good, an increase in income will

increase the demand for the good.

An improvement in technology in the production of computers would

increase the supply of computers.

A per-unit government subsidy to producers of a good tends to

increase the supply of the good.

The market clearing price occurs at the _____ of the market demand curve and the market supply curve. It is also called the _____ price, the price from which there is no tendency to change in demand or supply

intersection equilibrium

The law of demand posits an _____ relationship between the quantity demanded of a good and its price of other things being equal

inverse

The _____ _____ curve is derived by summing the quantity demanded by individuals at each price. Graphically, we add the individual demand curves horizontally to derive the total, or market, demand curve

market demand

The _______ _____ curve is obtained by horizontally adding individual supply curves in the market.

market supply

If the price changes, we _____ _____ a curve--there is a change in quantity demanded or supplied. If some other determinant changes, we _____ a curve--there is a change in demand and supply

move along shift

A change in the quantity demanded comes about when there is a change in the price of the good (other things held constant) Such a change in quantity demanded involves a _____ _____ a given demand curve

movement along

The law of supply states that there is a _____ relationship between the price and _____ .

positive the quantity supplied

The law of demand states that as prices increases,

quantity demanded decreases, all other things equal.

At the market equilibrium price,

quantity demanded equals quantity supplied.

The supply curve is drawn with other things held constant. If these ceteris paribus conditions of supply change, the supply curve will shift. The major ceteris paribus conditions are 1)_____ 2)_____ 3)_____ 4)_____ and 5)_____

technology and productivity cost of inputs used to produce the product price expectations taxes and subsidies number of firms in the industry

The law of supply states that there is a positive relationship between the price and the quantity supplied. ​Thus, as the price increases, _____ .

the quantity produced by firms increases

Other things being equal, an increase in wages paid to workers in the steel industry will cause

the supply of steel to decrease.