Econ Test 1 (FINAL REVIEW)
Production-possibilities curves demonstrate that:
Producing more of one good implies a reduction in the potential production of another good.
The fundamental problem of economics is:
The scarcity of resources relative to human wants.
which of the following will occur as the price of a good decreases?
the quantity demanded for that good will increase.
The price of a commodity in terms in another commodity is
the relative price
If an economy experiences increasing opportunity costs with respect to two goods, then the production-possibilities curve between the two goods will be:
Bowed outward
True or False, If the price of a good rises, quantity demanded of the good decreases and the demand curve shifts towards the origin as long as supply is static.
False
True or False, an increase in demand shifts the demand curve to the left, closer to the price axis.
False
true or false If two goods, J and K, are compliments when quantity demanded of J increases, the demand for K increases
False
Capital, as economists use the term, refers to:
Final goods that are used to produce other goods and services.
Determinants of Supply
Future expectations Production costs Advancement of technology Number of sellers Price of Similar Goods
If an economy is producing on its production possibilities curve, then producing:
More of one god implies producing less of another good.
which component of a market system conveys information about what is relatively scarce and what is relatively abundant?
Prices
Problems with Price Ceilings
Shortages
In economics, scarcity means that:
Society's desires exceed the wants-satisfying capability of the resources available to satisfy those desires.
Problems with Price Floors
Surpluses
Determinants of Demand
Taste and Preference Income Price of related goods Number of buyers Expectation of future
Opportunity cost is:
The alternative that must be given up in order to get something else.
A point on a nation's production-possibilities curve represents:
The full employment of resources to achieve a particular combination of goods and services.
To an Economist, scarcity means:
There are not enough resources available to satisfy all our desires.
True or False, a decrease in demand shifts the demand curve leftward towards the origin, while a decrease in quantity demanded involves a movement upward along a particular demand curve.
True
true or false if J and K are compliments an increase in the price of J causes, the demand for K to rise
True
Overtime we use scarce resources in one way:
We forgo the opportunity to use them in other ways.
Economics is the study of how:
best to use society's scarce resources.
what causes movement along a supply curve?
a change in the price
an increase in quality demanded is caused by
a decrease in the price of the good
Suppose that short skirts that were fashionable in the 1990s become unfashionable in the late 2000s. If other factors were held constant, then there would be
a leftward shift in the demand curve
any improvement in overall production technology that permits more output to be produced with the same level of inputs causes
a rightward shift of the supply curve so that more is offered at each price
an increase in demand is shown graphically by
a shift of the demand curve to the right
If the demand of a good is inversely related to income, it must be
an inferior good
The law of demand states that
at lower relative prices, a larger quantity of a good will be purchased than at higher relative prices.
Last year there were 6 pizza shops in town. This year there are only 4. other things equal, the decrease in the number of suppliers will
cause a decrease in the quantity supplied at each price
If price increases and the quantity purchased increases, we know that
demand increased
here's what we know about last year's weekly demand for 2-night DVD rentals in the village of harmony: When P=$3, Qd=100; at P=$5, Qd=75; and when P=$7, Qd=50. This year the village population has increased by 25%. What impact is this most likely to have?
each individuals demand curve for DVD rentals will shift to the left.
Price floors are designed to
establish a minimum allowable price
Sarah gets a salary increase of 20 percent. Before her raise, she purchased 5 pounds of hamburger and 1 pound of steak a month. after her raise, she consumes 2 pounds of hamburger and 3 pounds of steak a month. If everything else is held constant, we know that...
hamburger is an inferior good and steak is a normal good
The meaning of demand is
how badly someone wants a good
If there is a decline in the price of milk, an input in the production of ice-cream, then there will be an
increase in the supply of ice-cream and a rightward shift of supply curve.
A fundamental principle in demand analysis is that a change in price leads to
movement along the demand curve
The law of demand is based on the observation that
people buy more more of a product when the price falls.
If goods X and Y are substitute goods, then an increase in the price of Y, other things constant
results in a decrease in the quantity of Y consumed, but increases the demand for X.
The law of demand includes that statement "other things being equal." These other things include all of the following
the price of related goods, incomes, and tastes
If more buyers came into the market for a good, we would expect to see the market demand curve
shift outward to the right
price ceilings cause
shortages
a demand curve
slopes down because of the inverse relationship between price and quantity demanded.
Suppose that the equilibrium price of gasoline has increased, while the equilibrium quantity of gasoline has fallen. Also either demand changed or supply changed, but not both. Which has changed and how?
supply decreased
suppose that because of cold weather in brazil, a significant portion of the coffee crop has been lost. this statement means that
the amount of coffee beans at various prices will decline
an increase in price will lead to an increase in quantity supplied. This statement is
the law of supply
the direct relationship between changes in price and changes in quantity supplied is
the law of supply
Adding the quantities demanded by all consumers at every price will yield
the market demand curve
the only variable considered when we move along the demand curve is
the price of the good itself.
Suppose that the price of sugar, an input used to produce cereal, rises. as a result
the supply curve for cereal would shift to the left.
if the government imposes a per-unit tax on sales of an industry's product, then we would expect
the supply curve in that industry would shift to the left
an increase in demand and a decrease in supply will lead to an
unambiguous increase in price, but the effect on quantity is indeterminate