MACRO CH 3 HW
A perfectly competitive market is a market that meets the conditions of
(1) many buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market.
which of the following would cause a shift in the demand curve from point A to point B? a. an increase in the price of a substitute good b. a decrease in income (inferior good) c. an increase in income (normal good) d. all of the above
D
Consider the following statement: "An increase in supply decreases the equilibrium price. The decrease in price increases demand." The statement is
False, decreases in price affect the quantity demanded, not demand.
According to the law of demand, there is an inverse relationship between price and quantity demanded. That is, the demand curve for goods and services slopes downward. Why?
When the price of a good increases, consumers' purchasing power falls, and they cannot buy as much of the good as they did prior to the price change
A diagram in panel b is an example of
a demand curve
In the diagram to the right, when demand decreases, _____ develops at the original price. Equilibrium price will _____ and equilibrium quantity will ______ as a new equilibrium is established.
a shortage, rise, rise
In general, the term "ceteris paribus" means
all else equal
Market price is determined by
both supply and demand
On the diagram to the right, a movement from A to B represents a
change in quantity demanded
On the diagram to the right, a movement from A to B represents a
change in quantity supplied
In the diagram to the right, point A provides the _____, point B the _____, and point C the _____.
equilibrium price; market equilibrium; equilibrium quantity
Which of the following events would cause the supply curve to decrease from S1 to S2?
increase in the price of inputs
Consider the figure to the right and assume that it is the market for health-care services. When the "baby boomer" generation retires, the number of people who require health care increases by 30%, and, as a result, the number of health-care providers also increases, but by only 25%. What is the effect on the price of health-care services over time?
it increases because demand increased by more than supply
The diagram in panel a is an example of
supply schedule
According to the law of supply,
there is a positive relationship between price and quantity supplied. as the price of a product increases, firms will supply more of it to the market.
According to the law of demand,
there is an inverse relationship between price and quantity demanded
The distinction between substitutes and complements is
ubstitute goods are used for the same purposes while complementary goods are used together.
The distinction between a normal and an inferior good is
when incomes increases , demand for a normal good increases while demand for an inferior good falls
