Macro mod 2 part 1

Change ( Shift ) in Demand

A change in the quantity of a good , service , or resource demanded at every price . Graphically , an increase in demand is represented by a rightward shift of the demand curve , while a decrease in demand is represented by a leftward shift of the demand curve . A particularly rainy fall season is likely to cause an increase in demand for umbrellas , as consumers will be more willing to buy them . A rainy fall season is also likely to result in a decrease in demand for shorts and T - shirts because fewer people will be willing to wear them in wet fall weather .

Movement Along the Demand Curve

A change in the quantity of a good , service , or resource demanded due to a change in its price . Graphically , this change is represented as a movement along an existing demand curve .

Change ( Shift ) in Supply

A change in the quantity of a good , service , or resource supplied at every price . Graphically , an increase in supply is represented by a rightward shift of the supply curve , while a decrease in supply is represented by a leftward shift of the supply curve . Consider the market for wheat . All else held constant , the discovery of a new and improved fertilizer will cause an increase in supply because farmland will become more productive and more wheat would thus be supplied . However , a widespread drought would damage the wheat crop and cause a decrease in supply .

Movement along the Supply Curve

A change in the quantity of a good , service , or resource supplied due to a change in its price . Graphically , this change is represented as a movement along an existing supply curve .

What is the effect of a subsidy being placed on the market ?

A decrease in the cost of production

Normal Good

A good for which there is a direct relationship between the demand for the good and income . For normal goods , an increase in income increases demand , and a decrease in income decreases demand ; a good with a positive income elasticity of demand . When Clara was a college student , her financial resources were limited , and she only owned two pairs of shoes . After she graduated and landed a high - paying job , Clara used her income to buy several new pairs of shoes and an entirely new wardrobe . For Clara , we know that clothing items , such as shoes , are normal goods because when her income increased , her demand for clothing increased and she bought more .

Inferior Good

A good for which there is an inverse relationship between the demand for the good and income . For inferior goods , an increase in income decreases demand , and a decrease in income increases demand ; a good with a negative income elasticity of demand . When Clara was a college student , her financial resources were limited , and she had to eat macaroni and cheese almost every night . After she graduated and landed a high - paying job , she stopped eating mac and cheese and , instead , added favorites like lobster bisque to her menu . For Clara , we know that macaroni and cheese must be an inferior good because when her income increased , her demand for mac and cheese decreased .

Demand Curve

A graphical representation of the relationship between the price of a good , service , or resource and the quantities consumers are willing and able to buy over a fixed time period , all else held constant .

Supply Curve

A graphical representation of the relationship between the price of a good , service , or resource and the quantities producers are willing . and able to supply over a fixed time period , all else held constant .

Which is the broadest definition of a market ?

A group of buyers and sellers who exchange a good , service , or resource , not necessarily at a specific place

Which is the broadest definition of a market ?

A group of buyers and sellers who exchange a good , service , or resource , not necessarily at a specific place .

Subsidy

A payment made by the government that does not necessarily require an exchange of economic activity in return . Subsidies most often take the form of payments to businesses . The federal government often provides subsidies to producers of renewable energy in an effort to encourage increased production , with a goal of lowering the price of renewable energy .

Tax

A payment made to government that is the result of economic activity . Taxes are generally collected from both individuals and firms . When you buy gasoline , the price you pay for each gallon includes the cost of producing the gasoline plus a portion of the taxes that are paid by producers at the local , state , and federal levels - all of which increase the overall price of each gallon .

Law of Demand

A principle in economics that states that as the price of a good , service , or resource rises , the quantity demanded will decrease , and vice versa , all else held constant . If you lower the price of a cup of lemonade , the law of demand tells you that people will be more willing and able to buy a cup of lemonade and quantity demanded will increase .

Law of Supply

A principle in economics that states that as the price of a good , service , or resource rises , the quantity supplied will increase , and vice versa , all else held constant . All else held constant , if the price of orange juice rises , the law of supply indicates that producers will be willing and able to increase the quantity of orange juice they supply to the market .

A new technology increases the production of widgets by 25 % at all possible prices . Which of the following statements offers the best description of the location of the new supply curve , relative to the original curve ?

A shift to the right with a greater increase occurring at higher price levels .

Demand Schedule

A tabular representation of the relationship between the price of a good , service , or resource and the quantities consumers are willing and able to buy over a fixed time period , all else held constant .

Supply Schedule

A tabular representation of the relationship between the price of a good , service , or resource and the quantities producers are willing and able to supply over a fixed time period , all else held constant .

Good

A tangible product that consumers , firms , or governments wish to purchase .

Which of the following would shift the supply curve for guitars ?

A tax is implemented on guitars

The number of consumers willing and able to purchase new cars increases . How will the market for new cars change ?

An increase in demand for new cars

Service

An intangible product or action that consumers , firms , or governments wish to purchase .

Market

Any place where , or mechanism by which , buyers and sellers interact to trade goods , services , or resources . Whether you buy a laptop from your local electronics store , an online retailer , or someone selling a used laptop through eBay , you and the seller are both participating in the market for laptops . Markets can take almost any form . Formal markets , such as the New York Stock Exchange and your local retail store , are highly structured . Informal markets , like swap meets or garage sales , are less structured , with fewer rules .

If consumer preference for cooking at home increases , how will this impact the market for groceries ?

Demand will increase at each price .

Complements

Goods , services , or resources that are used or consumed with one another Because they are often eaten together , tortilla chips and salsa are complements . If you decide to buy a jar of salsa because it's on sale , you'll likely pick up a bag of tortilla chips too .

Substitutes

Goods , services , or resources that are viewed as replacements for one another . In cooking , margarine is often a substitute for butter . If margarine goes on sale , you're likely to buy less butter and instead buy more margarine .

Which of the following correctly states the three main reasons the demand curve is downward sloping ?

Marginal benefit , purchasing power , and substitutes

Sellers

Market participants who are willing and able to sell goods , services , or resources

Buyers

Market participants who seek to obtain goods , services , and resources .

Suppose that the price of jelly increases . As a result , the demand for peanut butter shifts to the left . What can we infer from this ?

Peanut butter and jelly are complements .

How is the market supply of a good or service calculated ?

Summing the quantity produced by all sellers at every price within the market

Firms expecting a cold winter will anticipate an increased demand for scarves resulting in an increased future price . How will the market adjust today ?

Supply will decrease at every possible price .

____ and subsidies alter the costs or benefits of producing goods and services

Taxes

Seller Expectations

The anticipated future outcomes , including prices , that sellers associate with the production of a good , service , or resource .

Expectations

The anticipation by individuals and firms of costs and benefits that lie in the future .

For normal goods , an increase in income will have what effect on demand ?

The demand curve will shift to the right .

The price of oranges , a substitute to apples , increases . How will this affect the market for apples ?

The demand for apples will increase at every price .

What happens when the prices of complements or substitutes for a product change ?

The demand for that product will change

Income Effect

The effect that a change in the price of a good , service , or resource has on the purchasing power of income . For example , when prices decrease , the purchasing power of income increases and consumers are able to purchase more goods , services , or resources . Suppose you have only $ 20 to spend on gasoline each week . When the price of gasoline rises from $ 2 per gallon to $ 4 per gallon , the purchasing power of that $ 20 falls from 10 to 5 gallons of gasoline . The resulting decrease in the quantity of gasoline demanded is due to the income effect

Substitution Effect

The effect that a change in the price of one good , service , or resource has on the demand for another . For example , an increase in the price of one good will increase the demand for its substitutes , and vice versa . Victor usually eats an orange or an apple every day with his lunch . The substitution effect explains why , when he sees the price of oranges increase one week , he substitutes away from oranges and buys more apples instead .

Resource

The inputs used to produce goods and services ; also known as factors of production . Resources fall into four categories : land , labor , capital , and entrepreneurial ability . Henry Ford organized resources - land , labor , capital , and his own entrepreneurial ability - in order to produce automobiles .

Resources

The inputs used to produce goods and services ; also known as factors of production . Resources fall into one of four categories : land , labor , capital , and entrepreneurial ability .

Technology

The knowledge , inventions , and innovations that can potentially increase resource productivity

_____ focuses entirely on the effect of a change in the good's price on the quantity of the product consumed and holds everything else constant .

The law of demand

Diminishing Marginal Utility

The negative relationship between the quantity of a good , service , or resource and the marginal utility obtained from each additional unit consumed in a given period of time . For Monica , the first cup of coffee in the morning is worth $ 3 ; the second cup is worth only $ 1 . So , if the price of coffee is $ 2 per cup , she buys one cup of coffee . Her first cup of coffee gives her a lot of satisfaction and is worth the price . She doesn't buy a second cup because of diminishing marginal utility : The second cup is worth only $ 1 to her , so she can't justify paying $ 2 to buy it .

Market Demand

The overall , or total , demand for a good , service , or resource . It represents the horizontal summation of the quantities demanded by individuals , firms , states , or even nations at each price over a fixed time period , all else held constant .

Market Supply

The overall , or total , supply of a good , service , or resource . It represents the horizontal summation of the quantities supplied by individuals , firms , states , or even nations at each price over a fixed time period , all else held constant .

Tastes and Preferences

The perception of the desirability associated with consuming a good , service , or resource .

Diminishing Marginal Productivity

The principle that if at least one input of production is fixed , the marginal productivity of additional variable resources will eventually fall , all else held constant . At some point , adding more labor to fixed capital generates a situation where workers get in the way of other employees trying to work . If a restaurant owner decides to hire additional employees but does not change the size of the restaurant or the amount of capital available to its employees to perform their tasks , the restaurant will likely experience diminishing marginal productivity .

Quantity Demanded

The quantity of a good , service , or resource that consumers are willing and able to buy at a given price .

Quantity Supplied

The quantity of a good , service , or resource that producers are willing and able to supply at a given price .

Producers expect the price of lumber to increase next month . How will producers respond today ?

The supply of lumber will decrease at every price .

Subsidies most often take the form of payments to businesses by governments

True

In economics , a downward - sloping or upward - straight line is often called :

a curve

When less output is being produced at every price , we say there is :

a decrease in supply .

A decrease in demand is shown by :

a leftward shift of the demand curve .

The supply curve will shift to the right or left when :

a non - price determinant of supply changes .

If demand shifts to the right when income increases , we can conclude that the good is :

a normal good

When economists refer to a " good , " they are referring to :

a tangible product that consumers , firms , or governments wish to purchase .

In economics , the word " curve " is typically used to refer to :

almost any graphical representation of the relationship between two variables .

An increase in the quantity of a good service - or resource supplied at every price is :

an increase in supply .

An inferior good has :

an inverse relationship between demand for the good and income .

The demand schedule represents the relationship between the prices of a good , service , or resource :

and the quantity that individuals and firms are willing and able to buy , all else held constant , in a tabular form .

When economists refer to resources , they are referring to :

any item that is used to produce goods and services .

Substitute goods :

are viewed as replacements for other goods .

The law of demand states that :

as the price of a good , service , or resource rises , the quantity demanded will fall , all else held constant

The taxes and subsidies that are under consideration in analyzing supply are applied to :

businesses

The demand curve :

can be a straight line or a nonlinear curve .

A change in income :

can increase or decrease demand ,

The price of a _____ of a good is one of the nonprice determinants of its demand .

complement or substitute

Goods , services , or resources that are consumed together are called

complements

Without individuals and households that are willing and able to buy a good , the _____ side of the market cannot exist

consumer

More of a good will be demanded at each price if :

consumers ' perceptions of the good improve .

Resources ( such as land ) and technology ( such as the ability to draw water from a well ) :

contribute to how a good or service is produced for the market .

A graphical representation of the relationship between the price of a good , service , or resource and the quantity that individuals and firms are willing and able to buy , all else held constant , describes the demand

curve

A change in _____ occurs when a nonprice determinant of demand changes .

demand

Suppose the price of burritos at Jack's Burrito Shack fell from $ 7.00 to $ 6.00 and the quantity of burritos purchased rose from 25 per hour to 30 per hour . This is consistent with the law of

demand

Tastes and preferences , the number of buyers , and buyer expectations are all nonprice determinants of

demand

The _____ for a product will change when the prices of the goods that are complements or substitutes for that product change .

demand

When income changes _____ can either increase or decrease .

demand

A graphical representation of the relationship between the price of a good , service , or resource and the quantity that individuals and firms are willing and able to buy , all else held constant , describes the :

demand curve

Market demand is the horizontal summation of individual

demand curves

A tabular representation of the relationship between the price of a good , service , or resource and the quantity that individuals and firms are willing and able to buy , all else held constant , describes the :

demand schedule

Prices of related goods , complements and substitutes , are :

determinants of demand

The principle that if at least one input of production is fixed , the marginal productivity of additional variable resources will eventually fall , all else held constant , is known as :

diminishing marginal productivity .

The negative relationship between the quantity of a good , service , or resource and the marginal utility obtained from each additional unit consumed in a given period of time describes :

diminishing marginal utility

The price of a good and the quantity supplied are :

directly related

A change in supply :

does not have to be a parallel shift .

Due to the inverse relationship between the price of a good and the quantity demanded for the good , we expect that the demand curve is :

downward - sloping

The demand curve focuses entirely on the :

effect of a change in price on the quantity of the product consumed and holds everything else constant .

According to the law of diminishing marginal productivity , the marginal productivity of additional variable resources will eventually fall , all else held constant , if at least one input is

fixed

Markets , such as the New York Stock Exchange and your local retail store , are _____ markets .

formal

As a winter storm approaches , we would expect that the demand for :

generators increases .

The horizontal summation of individual demand curves :

gives the market demand curve .

A tangible product that consumers , firms , or governments wish to purchase is a :

good

Complements are :

goods , services , or resources that are consumed together

The law of supply tells us that :

higher prices of goods result in higher quantities of goods being supplied .

Market supply is the _____ summation of the quantities supplied by individuals , firms , states , or even nations at each price over a fixed time period .

horizontal

Suppose you have $ 30 to spend on tacos each week . When the price of tacos increases from $ 2.00 to $ 3.00 , the purchasing power falls from 15 . tacos per week to 10 tacos per week . This decrease in the quantity of tacos demanded illustrates the

income effect

If the number of buyers increases , the demand will :

increase and the curve will shift to the right .

A tax on producers _____ the cost of producing.

increases

On the supply side of the market , when the price of a good increases , the quantity supplied of the good :

increases

According to the law of supply , as price _____ quantity supplied _____.

increases ; increases

A tax on producers :

increases the cost of producing .

Taxes are generally collected from :

individuals and firms .

A good for which there is an inverse relationship between the demand for the good and income is a ( n ) _____ good .

inferior

Markets such as swap meets or garage sales are called _____ markets .

informal

A subsidy :

is a benefit given by the government to individuals or businesses .

Technology refers to :

knowledge , inventions , and innovations that can potentially increase resource productivity

When producers expect higher future prices , current supply shifts to the

left

A subsidy to producers :

lowers the cost of producing .

Any place where , or any mechanism by which , buyers and sellers interact to trade goods , services , or resources is a ( n )

market

Any place where , or mechanism by which , buyers and sellers interact to trade goods , services , or resources is a called a ( n ) :

market

The sum of individual supply curves added together reflect the _____ supply curve

market

Sellers are :

market participants who are willing and able to sell goods , services , or resources .

The overall - or total - supply of a good - service - or resource is the :

market supply

The total quantity all producers are willing and able to produce at every price is known as :

market supply .

For _____ goods , an increase in income increases demand and a decrease in income decreases demand .

normal

A good for which there is a direct relationship between the demand for the good and income is a ( n )

normal good

Firms will be willing and able to produce more output only when prices rise because the :

opportunity cost of production is increasing .

Market demand is based on the :

overall preferences of everyone in the market .

The perceived desirability of consuming a good , service , or resource refers to the tastes and _____ of buyers

preferences

When a non _____ determinant of demand changes , the demand curve shifts .

price

When drawing a supply curve , we always place _____ on the vertical axis and _____ supplied on the horizontal axis

price ; quantity

The income effect is the effect that a change in the :

price of a good , service , or resource has on the purchasing power of income .

The substitution effect is the effect that a change in the :

price of one good , service , or resource has on the demand for another .

Companies will be willing and able to produce additional units of a good only if the :

price of the good increases enough to cover the increasing costs .

When we consider the effects of taxes and subsidies on the market for goods , services , and resources , we evaluate how taxes and subsidies affect :

producers

Any change in technology and the availability and the quality of resources are likely to affect the ____ that producers are willing and able to supply to the market at every price .

quantity

When the price of a good or service decreases :

quantity demanded increases .

Any change in the availability and quality of resources and technology will likely affect the :

quantity producers are willing and able to supply to the market at every price .

When we talk about the demand for sunglasses , we are referring to the :

quantity that consumers are willing and able to buy at a variety of different prices , all else held constant .

Any item , whether a gift of nature , the result of production , or the result of human effort , that is used to produce goods and services is a :

resource

Another term for the factors of production used to produce goods and services is :

resources

The anticipated future outcomes , including prices , that sellers associate with the production of a good , service , or resource are expectations of the

seller

The anticipated future outcomes , including prices , that sellers associate with the production of a good , service , or resource are expectations of the :

seller

Market participants who are willing and able to sell goods , services , or resources are known as :

sellers

An intangible product or action that consumers , firms , or governments wish to purchase is a :

service

An intangible product that consumers wish to purchase is a :

service

To simplify analysis in economics , supply curves are often drawn as :

sloping lines .

The demand curve shifts when :

something other than the price of a good changes .

If the price of chicken increases and , as a result , you buy more pork and less chicken ( even though the price of pork has not changed ) , then chicken and pork are :

substitutes

The _____ effect is the effect that a change in the price of one good , service , or resource has on the demand for another .

substitution

Market supply is the :

sum of individual supply curves added together .

A change in taxes and subsidies on producers alters market

supply

The law that states that as the price of a good , service , or resource rises , the quantity supplied will increase , all else held constant , is the law of

supply

When the number of sellers increases ,:

supply increases .

The knowledge , inventions , and innovations that can potentially increase resource productivity are known as :

technology

When there is an increase in demand ,:

the demand curve shifts to the right

An increase in demand is depicted graphically as :

the demand curve will shift to the right .

Suppose that you only eat hot dogs on a hot dog bun and you never eat hot dog buns without a hot dog . If the price of hot dog buns increases :

the demand for hot dogs decreases

When considering how changes in tastes and preferences or demographics affect demand , we tend to evaluate :

the entire market

A tax is a payment made to :

the government that is the result of economic activity .

The market demand represents :

the horizontal summation of individual demand curves .

In a " market , " prices and quantities traded are determined mostly by :

the interaction of buyers and sellers in a market .

A market refers to :

the interaction of buyers and sellers of a particular good .

The overall or total demand for a good , service , or resource is :

the market demand .

Other things held constant , the demand curve will shift when :

the nonprice determinants of demand change .

Tastes and preferences refer to :

the perceived desirability of consuming a good , service , or resource .

The interaction of buyers and sellers in a market is fundamental for the determination of :

the price of goods and services .

As the price of a good , service , or resource rises :

the quantity demanded will fall .

When the price of smart phones increases :

the quantity of smart phones supplied will increase .

The price of sugar increases . The law of supply states :

the quantity of sugar supplied will increase

According to the law of supply , as the price of a good , service , or resource rises :

the quantity supplied will increase - and vice versa - all else held constant

In a market , when the price or availability of resources used in the production of a certain good changes .:

the supply curve shifts .

When the number of sellers in a market changes ,:

the supply curve shifts .

There is an increase in the supply of pumpkins . This event can be seen graphically as :

the supply curve shifts to the right .

Two goods are considered substitutes if :

there is a direct relationship between the price of one good and the demand for the substitute .

When eating pizza , you value the first , second , third , and fourth slices of pizza at $ 10 , $ 7 , $ 5 , and $ 3 , respectively . This decrease in the value you place on each additional slice is called diminishing marginal

utility

A market cannot exist :

without individuals and firms that are willing and able to buy a good .

When drawing a supply curve , we always place price on the __ axis and quantity on the __ axis

y ; x

Which of the following would be considered nonprice determinants of the demand for flour ?

•A change in the number of buyers of flour •A change in buyers ' expectation of the price of flour next week •A change in consumer preferences to bake

Which of the following is a possible outcome if a nonprice determinant of supply changes ?

•A decrease in supply at all possible prices •An increase in supply at all possible prices

Which of the following are reasons for the demand curve sloping downward ?

•The substitution effect •The income effect •Diminishing marginal utility

Which of the following are examples of resources ?

•Workers hired to pick grapes at a vineyard •An oven used to bake bread at a bakery

The demand curve for a normal good is downward sloping because

•as prices rise , the purchasing power of each dollar earned falls , and consumers are willing and able to buy less of a good •the benefit of consuming more of a good falls with each additional unit , so the price consumers are willing and able to pay also falls with increased consumption •when consumers purchase substitutes , the quantity demanded of the good falls

Shifts in supply :

•can be parallel •occur when there is a change in the nonprice determinants of supply

Taxes and subsidies matter because they :

•have unanticipated effects on other markets •stimulate production or collect revenue

When the supply curve shifts to the left ,:

•lower quantities of a good , service , or resource are produced at all prices •it is called a decrease in supply