Unit 4

At the price of $7/whatchamacallit sellers would be willing to sell _____ thousands of whatchamacallits.

15

If the price increased the $9 sellers would be willing to sell ____ thousands of whatchamacallits.

17

Fixed Cost

a cost that does not vary depending on production or sales levels

What happens to equilibrium when on of the determinants of demand change?

a determinant of demand causes an increase in demand

Tax

a fee charged by a government on a product, income or activity

Subsidy

a government payment to a company or individual to encourage a certain economic activity

Marginal Product

additional output due to an extra variable of input

Supply

amount of a product that would be offered for sale at all possible prices that could prevail in the market

Quantity Supplied

amount producers bring into the market at any given price

Disequilibrium

any time the market price is not at equilibrium

Consumer

anyone who consumes products in the market

The law of supply states what?

as price increases so does the quantity supply and as price decreases so does the quantity supply

Diminishing Returns

as the variable rate increases, the output increases at a diminishing rate.

What was the reason for the change in supply?

because of the new technology that was developed, production costs were lowered

Producer

businesses and individuals who supply products in the market

Decrease in price leads to...

decrease in quantity supplied

When price increases what happens to quantity demand?

decreases

Small price change causes big quantity supplied change

elastic supply

Items used in the process of production are?

input

Shortage

occurs when demand exceeds supply

Amount of output per unit of input is?

productivity

The amount of money suppliers have left after paying their costs is called what?

profit

When graphing the supply schedule what is the horizontal axis

quantity

Amount consumer is willing to buy at specific price

quantity demanded

A surplus exists when quantity ____ is greater than quantity demanded.

quantity supplied

If the price decreased the $5 sellers would be willing to sell _____ thousands of whatchamacallits.

quantity supplied

Quantity goods producers are willing to sell at a specific price

quantity supplied

Examples of Variable Costs

resources and wages

Inputs

resources used in production

A decrease in production costs will increase the profits shifts supply curve to the...

right

Money given to a company or individual by the government is what?

subsidy

Total Cost

sum of the fixed and variable costs

Law of Supply

suppliers will normally offer more for sale at high prices and less at lower prices

Equilibrium

the point where supply and demand are equal

If demand is held constant, how is equilibrium price changed by changes in supply (not quantity supply)?

when supply increases equilibrium price drops

Technology

broad concept that deals with knowledge and usage of tools and crafts and how they affect the ability to control an environment

Inelastic Supply

change in price has little effect on quantity supply (example gold earrings) (require a lot of time and money)

Variable Cost

changes when the business rate of an operation or output changes

Determinants of Supply

factors other than price that determine supply

T/F: A rise in the price of inputs for a product would cause a movement along the supply curve to the left.

false

T/F: A shortage is caused when supply exceeds demand.

false

T/F: An increase in price causes a decrease in supply.

false

T/F: Elasticity of supply explains the degree to which non-price determinants affect the quantity supplied.

false

T/F: Increase or decrease in technology, changes in producer expectations, and the increase or decrease in price, are all considered determinants of supply and will cause a shift in the supply curve.

false

Supply Curve

graph showing the various quantities supplied at each and every price that might prevail in the market

If the producer has set the price too low, this means quantity demanded is ______ than quantity supplied.

higher

If the price of oil significantly drops, the supply of gasoline will?

increase

Such a change would be a/an ______ in quantity supplied.

increase

A construction company adds one worker each week, on a construction project. They add no other inputs. What will happen to marginal productivity?

increase initially and then decrease

When price increases what happens to quantity supply?

increases

Examples of Fixed Costs

insurance, rent, taxes

Sellers are willing to sell a (smaller/larger) amount at each of the possible prices shown.

larger

A rise in the price of inputs shifts supply curve to the...

left

A rise in the price of inputs shifts the supply curve where?

left

An increase in production costs will decrease profits shifts supply curve to the...

left

An increase in taxes shifts supply curve to the...

left

An increase in the price of a related product will shift the supply curve where?

left

If a supplier realizes that he can shift his production from one product to another with a higher price, he will shift production which will cause the curve to shift where?

left

If the supplier expects the future price of their good to rise, they will decrease the supply of their good now, in order to hold off for the higher future price. This will shift the curve where?

left

Supplier expects future profits of good to rise and decreases supply shifts supply curve to the...

left

Supply Schedule

listing of the various quantities of a particular product supplied at all possible prices in the market

If the producer has set the price too high, this means quantity demanded is ____ than quantity supplied.

lower

What are the advantages of prices?

neutrality, flexibility(go up and down), freedom of choice, no administrative costs(no agency setting prices), and efficient, given the time, prices will be set

Surplus

occurs when supply exceeds demand

In a free-enterprise market, producers and consumers communicate through what?

price

When graphing the supply schedule what is the verticle axis

price

Only changes in what affect quantity supply

price moves along the curve

A fall in the price of inputs shifts supply curve to the...

right

A fall in the price of inputs shifts the supply curve where?

right

An increase in the number of sellers shifts supply curve to the...

right

An increase in the number of sellers will shift the supply curve where?

right

Comparing the New Supply Curve -S1 with the Original Curve-S you can say that the change in supply for whatchamacallits resulted in a shift of the supply curve to the _____

right

If the supplier expects the future price of their good to fall they will increase the supply of their good now, before prices drop. This will shift the curve where?

right

Subsidies shifts supply curve to the...

right

Supplier expects future profits of good to fall and increases supply shifts supply curve to the...

right

When quantity supply increases where does it move?

right

What will cause the price to adjust to market equilibrium?

sellers enter the market (if price is too high) or seller leave the market (if price is too low)

What would happen to the supply curve if the price of sugar suddenly increased due to a shortage so that five fewer donuts were supplied at every price?

shift left

What would happen to the demand curve if your teacher gave everyone extra credit for buying a donut, so ten more donuts would be sold at each price?

shift right

Elastic Supply

small change in price causes a large change in quantity supply (example t-shirts) (made quickly and easily)

Sellers are willing to offer a (smaller/larger) price at each of the possible quantities shown.

smaller

What happens to equilibrium when the one of the determinants of supply change?

supply causes an increase in supply

Fee charged by government on a product is?

tax

Revenue

the amount of money that a company receives from its activities in a given period

Productivity

the amount of output per unit of input

Marginal Costs

the costs of producing one or more unit of output

If determinants of supply cause an increase in supply, this will cause

the curve to shift right

Price Ceiling

the highest a price can be offered

Price Floor

the lowest a price can be

Profit

the making of gain in business activity for the benefit of the owners business

Total Product

total output produced by a firm

T/F: According to the law of supply, price and quantity have a direct relationship.

true

T/F: An increase in price causes an increase in quantity supplied.

true

T/F: If the price of butter increases, supply for margarine will decrease.

true

T/F: If the price of homes increases, construction builders will supply more.

true

T/F: Producers of valentine's candy produce more on valentine's day. This is an example of the supply curve shifting to the right.

true

T/F: The point where quantity supplied equals quantity demanded is called equilibrium.

true

Total Costs

variable and fixed costs

Production costs that change as the level of output changes are

variable costs

If supply is held constant, how is equilibrium price changed by changed in Demand (not quantity demand)?

when demand increases, equilibrium price rises