chapter 4 review

which economist began testing the supply and demand model by running experiments with his undergraduate students in 1956?

Vernon Smith

what is the difference between a change in demand and a change in quantity demanded?

a change in demand shifts the entire curve, a change in quantity demanded means price changed

What is a shortage?

a situation in which the quantity demanded is greater than the quantity supplied

what is a surplus?

a situation in which the quantity supplied is greater than the quantity demanded

how do you calculate total surplus?

consumer surplus + producer surplus

holding demand constant, if the supply curve shifts to the left, there will be a ___________ equilibrium and a _________ in equilibrium quantity

increase, decrease

economic growth in china has led to more Chinese people owning cars, which:

increased demand for oil, causing oil prices to rise

what happened to the demand for oil from the twentieth century to the 1970s?

it increased steadily

a surplus occurs when?

quantity supplied is greater than quantity demanded

an increase in demand causes a

temporary shortage at the old equilibrium price and a higher new equilibrium price and quantity.

what is equilibrium price?

the price at which the quantity demanded is equal to the quantity supplied

what is the equilibrium quantity?

the quantity at which the quantity demanded is equal to the quantity supplied

laboratory events by Vernon Smith support:

the supply and demand models usefulness in predicting changes in a free market

what explains how the OPEC crisis of 1973 affected oil prices?

the supply of oil was reduced, leading to a rise in oil prices

what is deadweight loss?

when you're not at equilibrium and you're missing out on gains from trade

what is equilibrium?

where marginal cost and benefit are the same