Ch. 3 Econ 101

According to the law of supply, price and quantity supplied have a(n) .... relationship

positive

According to the law of supply, price and quantity supplied have a(n) ______ relationship

positive

A change in quantity demand (Qd) is caused by an increase or decrease in the ..... of the product under consideration and nothing else

price

Buyers and sellers are brought together in a .....

market

_______ in supply while holding demand constant results in an increase in equilibrium price, but a decrease in equilibrium quantity.

-A decrease (a decrease is illustrated as a shift of the supply curve upward or the left) -A leftward shift (a leftward or upward shift of the supply curve represents a decrease in supply)

The following describes the law of demand

-All other things being equal, as price increases, quantity demanded decreases. -All other things being equal, as price decreases, quantity demanded increases

Government-controlled prices cause:

-Distortions in resource allocation -negative side effects -Surpluses -shortages

The following are determinants of demand:

-Prices of related goods -consumer expectations -number of buyers -consumers' income -consumer tastes

The following are some determinants of supply:

-Technology -Resource prices

The following are examples of markets

-The new york stock exchange -a local gas station -a pay-to-play online gaming site -ebay

From an economic perspective, the following are true of a market:

-The pursuit of buyers and sellers in making themselves better off -It is a virtual and/or physical institution or space -Buyers and sellers interact in their desire to buy and sell a good or service

A change in price of which of the following type of goods affect the demand for another good?

-complementary goods -substitute goods

Government-controlled prices in the form of price ceilings and price floors

-distort resource allocation -produce negative side effects (Negative side effects include shortages, surpluses and distortions of resource allocation.) -stifle the rationing function of prices

The following are some determinants of supply:

-subsidies -taxes

The following consists of a large number of independently acting buyers and sellers who buy and sell standardized products:

A competitive market

The concept of demand can be summarized by a schedule or curve showing the quantity of a product that would be:

Consumed at various possible prices Further explanation: Purchased or consumed represents the demand curve described here

One of the determinants of demand is _____ expectations

Consumer

...... resource prices raise production costs and, assuming a fixed product price, ....... profits

Higher; reduce

The following is not a determinant of demand

Price of substitutes in production Further explanation: Do not confuse the "price of related goods" on the demand side. This clearly states substitutes in production which hint to the supply side of the market.

The following determinant of supply deals with alternative products that can be produced by firms

Prices of substitutes in production

The following specifically refers to demand

The buyer side of any market

What determines market price and equilibrium output in a market

The interaction of buyers and sellers

A decrease in demand while holding supply constant results in:

a decrease in both equilibrium price and quantity

An increase in business taxes causes ..... in supply and will ..... production costs

a decrease; increase

The following refers to a particular apportionment or mix of goods and services most highly valued by society

allocative efficiency

The supply curve is ...... sloping curve

an upward

Quantity demanded is illustrated on the ..... axis, while price is illustrated on the ...... axis

horizontal (x); vertical (y)

A price ..... is the maximum legal price a seller may charge for a product or service

ceiling

Equilibrium price is otherwise known as market-...... price.

clearing

A ........ good is one that is used together with another good

complementary

A _________ good is one that is used together with another good.

complementary

The ...... incurred by firms when producing a good or service arise from the prices of the inputs that are used to produce said good or service

costs of production

A buyer's intentions or plans in regard to the purchase of a product is known as:

demand

A change in the number of buyers will cause a shift in the market ...... curve

demand

An increase in ..... while holding supply constant results in an increase in both equilibrium price and quantity

demand

An increase in ...... while holding supply constant results in an increase in both equilibrium price and quantity

demand

A shortage results from an excess of quantity ......

demanded

With a binding price ceiling, quantity ....... will exceed quantity ......, resulting in a persistent shortage of the product

demanded; supplied

Consumers experience ...... marginal utility the more they consume of a particular good or service

diminishing

In free markets, though prices will rise and fall, .... and ...... will always be achieved

equilibrium quantity; equilibrium price

A price ...... is a minimum price fixed by the government, generally imposed above the price, which is otherwise known as the equilibrium price

floor

For most, but not all products, a rise in consumer's ..... causes an increase in demand

income

The vast majority of goods that are not related to one another are called ...... goods

independent

Goods whose demand decreases when consumers' incomes rise and increase when consumers' income fall are called ..... goods

inferior

The law of demand describes a(n) ...... relationship between the price of a good or service and the quantity demanded of that good or service.

inverse Further explanation: The law of demand describes the behavior of consumers. It states that when price falls, quantity demanded rises and when price rises, quantity demanded falls. Note the opposite (negative/inverse) relationship between price and quantity demanded.

When two variables are being examined, and one variable moves one way and the other variable moves in the opposite direction, this is called a(n):

inverse relationship

A demand curve shows the plotted:

inverse relationship between price and quantity demanded for a product

If costs of production rise, the producer has an incentive to produce ..... output

less Further explanation: When the cost of resources such as, but not limited to raw materials and labor rise, it is more cost prohibitive to produce. Therefore, producers adjust output by producing less.

The income effect is best described as ..... increasing the purchasing power of income, enabling consumers to purchase ...... of a product and vice versa

lower prices; more

Diminishing ...... states that, in any specific time period, buyers will derive less satisfaction from each additional unit of the product consumed

marginal utility

The production of a good or service in the least costly way is known as ...... efficiency

productive

The interaction of buyers and sellers determines equilibrium price and equilibrium

quantity Further explanation: Changes in supply and demand determine equilibrium price and quantity

The price of ..... goods is a determinant of demand

related

When each additional worker of a firm produces less additional output than previously added workers, then the marginal cost of additional units of output:

rises

The law of supply states that as price ......, the quantity supplied (Qs) rises; as price ...... the quantity supplied falls

rises; falls

Which of the following refers to government financial assistance for the production of a good which lowers producers' costs and increases supply?

subsidy

A surplus is also known as an excess of .....

supply

Improvements in technology are a determinant of ......

supply

Market ..... is a schedule or curve showing the carious amounts of a product that producers are willing and able to make available for sale at each possible price during a specific period

supply

Producer expectations of future prices are a determinant of .......

supply

Substitution in production is a determinant of .....

supply

The number of sellers or competitors in a market is a determinant or shifter of the _____ curve.

supply

An increase in ..... while holding ...... constant results in a decrease in equilibrium price, but an increase in equilibrium quantity

supply; demand

An increase in ...... while holding .... constant results in a decrease in equilibrium price, but an increase in equilibrium quantity

supply; demand