Chapter 7 Quiz

Complementary good

A product often used into another product

What is the difference between elastic and inelastic demand ?

Elastic is rise or fall greatly affects amount people are willing to buy inelastic has little impact on price changes

Equilibrium Price

Price at which the amount producers are willing to supply is equal to the amount consumers are willing to buy

As price goes up

quantity demanded goes down

As price goes down

quantity demanded goes up

What three factors determine the price elasticity of demand

1.) The existence of substitutes 2.) Percentage of your budget 3.) Time to adjust price

Inelastic demand

Situation in which a product's price change has little impact on the quantity demanded by consumers

Surplus

Situation in which quantity supplied greater than quantity demanded at the current price

Shortage

Situation in which the quantity demanded is greater than the quantity supplied t current price

Black market

"underground" or illegal market in which goods are traded at prices above their legal maximum prices or in which goods are sold

Price Floor

A legal maximum price below which a good or service may not be sold

Price ceiling

A legal maximum rice that may be charge for a particular good or service

What is shown on a demand schedule ?

A table of prices and quantity demand

Voluntary exchange

A transaction in which a buyer and a seller exercise their economic freedom by working out.

Marginal utility

An additional amount of satisfactions

The Law of Diminishing Returns - What is the law of diminishing returns ?

As more factors of production are added total output will increase, but at a diminished rate.

Taxes - How would an increase in government ?

Business will not be willing to supply as much curve shift to the left

What five factors can affect the demand for a specific product ?

Changes in population, changes in income, changes in tastes and preferences

What do economists call elasticity

Consumer responsiveness change in prices

Demand curve

Downward sloping line that shows in graph from the quantities demanded at each possible

What is a demand curve ?

Downward sloping line that shows, quantity demanded at each possible price

Substitution effect

Economic rule stating that if two items satisfy the same need and the price

Law of demand

Economic rule stating that the quantity demanded and price move in opposite direction

Real income effect

Economic ruler stating that individuals cannot keep buying the same quantity of a product is it prices

Price elasticity of demand

Economics concept that deals with how much demand values according to changes in price

Law of diminishing returns

Economics rule that says as more units a factor of production are added to other factors of production some point total output continue increase

Market place

Freely chosen actions between buyers and sellers of goods and services

What is a complementary product ?

Generally bought and sold together

Price of Inputs - How does the supply curve shifts if the price of inputs drops ?

If costs of inputs increase, price increase. If cost of input decreases price decreases

Technology - How does an improvement in technology affect supply ?

It will increase supply

What is the measure of how much consumers will respond to price changes ?

Price elasticity of demand

Market

Process of freely exchanging goods and services between buyers and sellers

How is the price of a product affected if production is expanded ?

Producer must charge higher prices to cover any additional price of production

What does a supply curve show ?

Quantities that producers are willing to supply at each possible price

Law of marginal utility

Rule stating that the additional satisfactions a consumer gets from purchasing one more unit a product will lessen with each additional unit purchased

How is a change in quantity demanded similar to and different from a change in demand ?

Similar : Change in quantity demand cause curve to move Different : Change and curve shift

Ealstic Demand

Situation in which a given rise or fall in a product price greatly affects the amount that people are willing to buy

What is the law of supply ?

States that as the price of a good rises, quantity supplies rise.

What is the main difference between a demand curve and a supply curve ?

Supply curve is a direct relationship while demand curve is a inverse relationship

Number of firms in the industry - if the firms enter an industry , what happens to supply ?

Supply curve will shift to the right

Demand Schedule

Table showing quantities demanded at different possible price.

Supply Schedule

Table showing quantities supplies at different possible price

Utility

The ability of any good or service to satisfy consumer wants

Quantity Demanded

The amount of a good or service that a consumer is willing and able to purchase at

Quantity supplied

The amount of a good or service that a producer is willing and able to supply at a specific price

Demand

The amount of a good service that consumers are able and willing by at various process during time period

Supply

The amount of goods or service that producers are able and willing to sell at various prices

Rationing

The distribution of goods and services based on something other than pric e

In the case of supply, what does a higher price do for a producer ?

The higher the price of a good, the greater the incentive for the producer to produce

Technology

The use of science to developed new products and new methods for producing and distributing goods

Supply Curve

Upward - sloping line that shows in graph from the quantities supplied at each possible price

Law of supply

economics rule stating hat price and quantity supplied move in the same direction