Macro mod 2 part 1
Change ( Shift ) in Demand
A change in the quantity of a good , service , or resource demanded at every price . Graphically , an increase in demand is represented by a rightward shift of the demand curve , while a decrease in demand is represented by a leftward shift of the demand curve . A particularly rainy fall season is likely to cause an increase in demand for umbrellas , as consumers will be more willing to buy them . A rainy fall season is also likely to result in a decrease in demand for shorts and T - shirts because fewer people will be willing to wear them in wet fall weather .
Movement Along the Demand Curve
A change in the quantity of a good , service , or resource demanded due to a change in its price . Graphically , this change is represented as a movement along an existing demand curve .
Change ( Shift ) in Supply
A change in the quantity of a good , service , or resource supplied at every price . Graphically , an increase in supply is represented by a rightward shift of the supply curve , while a decrease in supply is represented by a leftward shift of the supply curve . Consider the market for wheat . All else held constant , the discovery of a new and improved fertilizer will cause an increase in supply because farmland will become more productive and more wheat would thus be supplied . However , a widespread drought would damage the wheat crop and cause a decrease in supply .
Movement along the Supply Curve
A change in the quantity of a good , service , or resource supplied due to a change in its price . Graphically , this change is represented as a movement along an existing supply curve .
What is the effect of a subsidy being placed on the market ?
A decrease in the cost of production
Normal Good
A good for which there is a direct relationship between the demand for the good and income . For normal goods , an increase in income increases demand , and a decrease in income decreases demand ; a good with a positive income elasticity of demand . When Clara was a college student , her financial resources were limited , and she only owned two pairs of shoes . After she graduated and landed a high - paying job , Clara used her income to buy several new pairs of shoes and an entirely new wardrobe . For Clara , we know that clothing items , such as shoes , are normal goods because when her income increased , her demand for clothing increased and she bought more .
Inferior Good
A good for which there is an inverse relationship between the demand for the good and income . For inferior goods , an increase in income decreases demand , and a decrease in income increases demand ; a good with a negative income elasticity of demand . When Clara was a college student , her financial resources were limited , and she had to eat macaroni and cheese almost every night . After she graduated and landed a high - paying job , she stopped eating mac and cheese and , instead , added favorites like lobster bisque to her menu . For Clara , we know that macaroni and cheese must be an inferior good because when her income increased , her demand for mac and cheese decreased .
Demand Curve
A graphical representation of the relationship between the price of a good , service , or resource and the quantities consumers are willing and able to buy over a fixed time period , all else held constant .
Supply Curve
A graphical representation of the relationship between the price of a good , service , or resource and the quantities producers are willing . and able to supply over a fixed time period , all else held constant .
Which is the broadest definition of a market ?
A group of buyers and sellers who exchange a good , service , or resource , not necessarily at a specific place
Which is the broadest definition of a market ?
A group of buyers and sellers who exchange a good , service , or resource , not necessarily at a specific place .
Subsidy
A payment made by the government that does not necessarily require an exchange of economic activity in return . Subsidies most often take the form of payments to businesses . The federal government often provides subsidies to producers of renewable energy in an effort to encourage increased production , with a goal of lowering the price of renewable energy .
Tax
A payment made to government that is the result of economic activity . Taxes are generally collected from both individuals and firms . When you buy gasoline , the price you pay for each gallon includes the cost of producing the gasoline plus a portion of the taxes that are paid by producers at the local , state , and federal levels - all of which increase the overall price of each gallon .
Law of Demand
A principle in economics that states that as the price of a good , service , or resource rises , the quantity demanded will decrease , and vice versa , all else held constant . If you lower the price of a cup of lemonade , the law of demand tells you that people will be more willing and able to buy a cup of lemonade and quantity demanded will increase .
Law of Supply
A principle in economics that states that as the price of a good , service , or resource rises , the quantity supplied will increase , and vice versa , all else held constant . All else held constant , if the price of orange juice rises , the law of supply indicates that producers will be willing and able to increase the quantity of orange juice they supply to the market .
A new technology increases the production of widgets by 25 % at all possible prices . Which of the following statements offers the best description of the location of the new supply curve , relative to the original curve ?
A shift to the right with a greater increase occurring at higher price levels .
Demand Schedule
A tabular representation of the relationship between the price of a good , service , or resource and the quantities consumers are willing and able to buy over a fixed time period , all else held constant .
Supply Schedule
A tabular representation of the relationship between the price of a good , service , or resource and the quantities producers are willing and able to supply over a fixed time period , all else held constant .
Good
A tangible product that consumers , firms , or governments wish to purchase .
Which of the following would shift the supply curve for guitars ?
A tax is implemented on guitars
The number of consumers willing and able to purchase new cars increases . How will the market for new cars change ?
An increase in demand for new cars
Service
An intangible product or action that consumers , firms , or governments wish to purchase .
Market
Any place where , or mechanism by which , buyers and sellers interact to trade goods , services , or resources . Whether you buy a laptop from your local electronics store , an online retailer , or someone selling a used laptop through eBay , you and the seller are both participating in the market for laptops . Markets can take almost any form . Formal markets , such as the New York Stock Exchange and your local retail store , are highly structured . Informal markets , like swap meets or garage sales , are less structured , with fewer rules .
If consumer preference for cooking at home increases , how will this impact the market for groceries ?
Demand will increase at each price .
Complements
Goods , services , or resources that are used or consumed with one another Because they are often eaten together , tortilla chips and salsa are complements . If you decide to buy a jar of salsa because it's on sale , you'll likely pick up a bag of tortilla chips too .
Substitutes
Goods , services , or resources that are viewed as replacements for one another . In cooking , margarine is often a substitute for butter . If margarine goes on sale , you're likely to buy less butter and instead buy more margarine .
Which of the following correctly states the three main reasons the demand curve is downward sloping ?
Marginal benefit , purchasing power , and substitutes
Sellers
Market participants who are willing and able to sell goods , services , or resources
Buyers
Market participants who seek to obtain goods , services , and resources .
Suppose that the price of jelly increases . As a result , the demand for peanut butter shifts to the left . What can we infer from this ?
Peanut butter and jelly are complements .
How is the market supply of a good or service calculated ?
Summing the quantity produced by all sellers at every price within the market
Firms expecting a cold winter will anticipate an increased demand for scarves resulting in an increased future price . How will the market adjust today ?
Supply will decrease at every possible price .
____ and subsidies alter the costs or benefits of producing goods and services
Taxes
Seller Expectations
The anticipated future outcomes , including prices , that sellers associate with the production of a good , service , or resource .
Expectations
The anticipation by individuals and firms of costs and benefits that lie in the future .
For normal goods , an increase in income will have what effect on demand ?
The demand curve will shift to the right .
The price of oranges , a substitute to apples , increases . How will this affect the market for apples ?
The demand for apples will increase at every price .
What happens when the prices of complements or substitutes for a product change ?
The demand for that product will change
Income Effect
The effect that a change in the price of a good , service , or resource has on the purchasing power of income . For example , when prices decrease , the purchasing power of income increases and consumers are able to purchase more goods , services , or resources . Suppose you have only $ 20 to spend on gasoline each week . When the price of gasoline rises from $ 2 per gallon to $ 4 per gallon , the purchasing power of that $ 20 falls from 10 to 5 gallons of gasoline . The resulting decrease in the quantity of gasoline demanded is due to the income effect
Substitution Effect
The effect that a change in the price of one good , service , or resource has on the demand for another . For example , an increase in the price of one good will increase the demand for its substitutes , and vice versa . Victor usually eats an orange or an apple every day with his lunch . The substitution effect explains why , when he sees the price of oranges increase one week , he substitutes away from oranges and buys more apples instead .
Resource
The inputs used to produce goods and services ; also known as factors of production . Resources fall into four categories : land , labor , capital , and entrepreneurial ability . Henry Ford organized resources - land , labor , capital , and his own entrepreneurial ability - in order to produce automobiles .
Resources
The inputs used to produce goods and services ; also known as factors of production . Resources fall into one of four categories : land , labor , capital , and entrepreneurial ability .
Technology
The knowledge , inventions , and innovations that can potentially increase resource productivity
_____ focuses entirely on the effect of a change in the good's price on the quantity of the product consumed and holds everything else constant .
The law of demand
Diminishing Marginal Utility
The negative relationship between the quantity of a good , service , or resource and the marginal utility obtained from each additional unit consumed in a given period of time . For Monica , the first cup of coffee in the morning is worth $ 3 ; the second cup is worth only $ 1 . So , if the price of coffee is $ 2 per cup , she buys one cup of coffee . Her first cup of coffee gives her a lot of satisfaction and is worth the price . She doesn't buy a second cup because of diminishing marginal utility : The second cup is worth only $ 1 to her , so she can't justify paying $ 2 to buy it .
Market Demand
The overall , or total , demand for a good , service , or resource . It represents the horizontal summation of the quantities demanded by individuals , firms , states , or even nations at each price over a fixed time period , all else held constant .
Market Supply
The overall , or total , supply of a good , service , or resource . It represents the horizontal summation of the quantities supplied by individuals , firms , states , or even nations at each price over a fixed time period , all else held constant .
Tastes and Preferences
The perception of the desirability associated with consuming a good , service , or resource .
Diminishing Marginal Productivity
The principle that if at least one input of production is fixed , the marginal productivity of additional variable resources will eventually fall , all else held constant . At some point , adding more labor to fixed capital generates a situation where workers get in the way of other employees trying to work . If a restaurant owner decides to hire additional employees but does not change the size of the restaurant or the amount of capital available to its employees to perform their tasks , the restaurant will likely experience diminishing marginal productivity .
Quantity Demanded
The quantity of a good , service , or resource that consumers are willing and able to buy at a given price .
Quantity Supplied
The quantity of a good , service , or resource that producers are willing and able to supply at a given price .
Producers expect the price of lumber to increase next month . How will producers respond today ?
The supply of lumber will decrease at every price .
Subsidies most often take the form of payments to businesses by governments
True
In economics , a downward - sloping or upward - straight line is often called :
a curve
When less output is being produced at every price , we say there is :
a decrease in supply .
A decrease in demand is shown by :
a leftward shift of the demand curve .
The supply curve will shift to the right or left when :
a non - price determinant of supply changes .
If demand shifts to the right when income increases , we can conclude that the good is :
a normal good
When economists refer to a " good , " they are referring to :
a tangible product that consumers , firms , or governments wish to purchase .
In economics , the word " curve " is typically used to refer to :
almost any graphical representation of the relationship between two variables .
An increase in the quantity of a good service - or resource supplied at every price is :
an increase in supply .
An inferior good has :
an inverse relationship between demand for the good and income .
The demand schedule represents the relationship between the prices of a good , service , or resource :
and the quantity that individuals and firms are willing and able to buy , all else held constant , in a tabular form .
When economists refer to resources , they are referring to :
any item that is used to produce goods and services .
Substitute goods :
are viewed as replacements for other goods .
The law of demand states that :
as the price of a good , service , or resource rises , the quantity demanded will fall , all else held constant
The taxes and subsidies that are under consideration in analyzing supply are applied to :
businesses
The demand curve :
can be a straight line or a nonlinear curve .
A change in income :
can increase or decrease demand ,
The price of a _____ of a good is one of the nonprice determinants of its demand .
complement or substitute
Goods , services , or resources that are consumed together are called
complements
Without individuals and households that are willing and able to buy a good , the _____ side of the market cannot exist
consumer
More of a good will be demanded at each price if :
consumers ' perceptions of the good improve .
Resources ( such as land ) and technology ( such as the ability to draw water from a well ) :
contribute to how a good or service is produced for the market .
A graphical representation of the relationship between the price of a good , service , or resource and the quantity that individuals and firms are willing and able to buy , all else held constant , describes the demand
curve
A change in _____ occurs when a nonprice determinant of demand changes .
demand
Suppose the price of burritos at Jack's Burrito Shack fell from $ 7.00 to $ 6.00 and the quantity of burritos purchased rose from 25 per hour to 30 per hour . This is consistent with the law of
demand
Tastes and preferences , the number of buyers , and buyer expectations are all nonprice determinants of
demand
The _____ for a product will change when the prices of the goods that are complements or substitutes for that product change .
demand
When income changes _____ can either increase or decrease .
demand
A graphical representation of the relationship between the price of a good , service , or resource and the quantity that individuals and firms are willing and able to buy , all else held constant , describes the :
demand curve
Market demand is the horizontal summation of individual
demand curves
A tabular representation of the relationship between the price of a good , service , or resource and the quantity that individuals and firms are willing and able to buy , all else held constant , describes the :
demand schedule
Prices of related goods , complements and substitutes , are :
determinants of demand
The principle that if at least one input of production is fixed , the marginal productivity of additional variable resources will eventually fall , all else held constant , is known as :
diminishing marginal productivity .
The negative relationship between the quantity of a good , service , or resource and the marginal utility obtained from each additional unit consumed in a given period of time describes :
diminishing marginal utility
The price of a good and the quantity supplied are :
directly related
A change in supply :
does not have to be a parallel shift .
Due to the inverse relationship between the price of a good and the quantity demanded for the good , we expect that the demand curve is :
downward - sloping
The demand curve focuses entirely on the :
effect of a change in price on the quantity of the product consumed and holds everything else constant .
According to the law of diminishing marginal productivity , the marginal productivity of additional variable resources will eventually fall , all else held constant , if at least one input is
fixed
Markets , such as the New York Stock Exchange and your local retail store , are _____ markets .
formal
As a winter storm approaches , we would expect that the demand for :
generators increases .
The horizontal summation of individual demand curves :
gives the market demand curve .
A tangible product that consumers , firms , or governments wish to purchase is a :
good
Complements are :
goods , services , or resources that are consumed together
The law of supply tells us that :
higher prices of goods result in higher quantities of goods being supplied .
Market supply is the _____ summation of the quantities supplied by individuals , firms , states , or even nations at each price over a fixed time period .
horizontal
Suppose you have $ 30 to spend on tacos each week . When the price of tacos increases from $ 2.00 to $ 3.00 , the purchasing power falls from 15 . tacos per week to 10 tacos per week . This decrease in the quantity of tacos demanded illustrates the
income effect
If the number of buyers increases , the demand will :
increase and the curve will shift to the right .
A tax on producers _____ the cost of producing.
increases
On the supply side of the market , when the price of a good increases , the quantity supplied of the good :
increases
According to the law of supply , as price _____ quantity supplied _____.
increases ; increases
A tax on producers :
increases the cost of producing .
Taxes are generally collected from :
individuals and firms .
A good for which there is an inverse relationship between the demand for the good and income is a ( n ) _____ good .
inferior
Markets such as swap meets or garage sales are called _____ markets .
informal
A subsidy :
is a benefit given by the government to individuals or businesses .
Technology refers to :
knowledge , inventions , and innovations that can potentially increase resource productivity
When producers expect higher future prices , current supply shifts to the
left
A subsidy to producers :
lowers the cost of producing .
Any place where , or any mechanism by which , buyers and sellers interact to trade goods , services , or resources is a ( n )
market
Any place where , or mechanism by which , buyers and sellers interact to trade goods , services , or resources is a called a ( n ) :
market
The sum of individual supply curves added together reflect the _____ supply curve
market
Sellers are :
market participants who are willing and able to sell goods , services , or resources .
The overall - or total - supply of a good - service - or resource is the :
market supply
The total quantity all producers are willing and able to produce at every price is known as :
market supply .
For _____ goods , an increase in income increases demand and a decrease in income decreases demand .
normal
A good for which there is a direct relationship between the demand for the good and income is a ( n )
normal good
Firms will be willing and able to produce more output only when prices rise because the :
opportunity cost of production is increasing .
Market demand is based on the :
overall preferences of everyone in the market .
The perceived desirability of consuming a good , service , or resource refers to the tastes and _____ of buyers
preferences
When a non _____ determinant of demand changes , the demand curve shifts .
price
When drawing a supply curve , we always place _____ on the vertical axis and _____ supplied on the horizontal axis
price ; quantity
The income effect is the effect that a change in the :
price of a good , service , or resource has on the purchasing power of income .
The substitution effect is the effect that a change in the :
price of one good , service , or resource has on the demand for another .
Companies will be willing and able to produce additional units of a good only if the :
price of the good increases enough to cover the increasing costs .
When we consider the effects of taxes and subsidies on the market for goods , services , and resources , we evaluate how taxes and subsidies affect :
producers
Any change in technology and the availability and the quality of resources are likely to affect the ____ that producers are willing and able to supply to the market at every price .
quantity
When the price of a good or service decreases :
quantity demanded increases .
Any change in the availability and quality of resources and technology will likely affect the :
quantity producers are willing and able to supply to the market at every price .
When we talk about the demand for sunglasses , we are referring to the :
quantity that consumers are willing and able to buy at a variety of different prices , all else held constant .
Any item , whether a gift of nature , the result of production , or the result of human effort , that is used to produce goods and services is a :
resource
Another term for the factors of production used to produce goods and services is :
resources
The anticipated future outcomes , including prices , that sellers associate with the production of a good , service , or resource are expectations of the
seller
The anticipated future outcomes , including prices , that sellers associate with the production of a good , service , or resource are expectations of the :
seller
Market participants who are willing and able to sell goods , services , or resources are known as :
sellers
An intangible product or action that consumers , firms , or governments wish to purchase is a :
service
An intangible product that consumers wish to purchase is a :
service
To simplify analysis in economics , supply curves are often drawn as :
sloping lines .
The demand curve shifts when :
something other than the price of a good changes .
If the price of chicken increases and , as a result , you buy more pork and less chicken ( even though the price of pork has not changed ) , then chicken and pork are :
substitutes
The _____ effect is the effect that a change in the price of one good , service , or resource has on the demand for another .
substitution
Market supply is the :
sum of individual supply curves added together .
A change in taxes and subsidies on producers alters market
supply
The law that states that as the price of a good , service , or resource rises , the quantity supplied will increase , all else held constant , is the law of
supply
When the number of sellers increases ,:
supply increases .
The knowledge , inventions , and innovations that can potentially increase resource productivity are known as :
technology
When there is an increase in demand ,:
the demand curve shifts to the right
An increase in demand is depicted graphically as :
the demand curve will shift to the right .
Suppose that you only eat hot dogs on a hot dog bun and you never eat hot dog buns without a hot dog . If the price of hot dog buns increases :
the demand for hot dogs decreases
When considering how changes in tastes and preferences or demographics affect demand , we tend to evaluate :
the entire market
A tax is a payment made to :
the government that is the result of economic activity .
The market demand represents :
the horizontal summation of individual demand curves .
In a " market , " prices and quantities traded are determined mostly by :
the interaction of buyers and sellers in a market .
A market refers to :
the interaction of buyers and sellers of a particular good .
The overall or total demand for a good , service , or resource is :
the market demand .
Other things held constant , the demand curve will shift when :
the nonprice determinants of demand change .
Tastes and preferences refer to :
the perceived desirability of consuming a good , service , or resource .
The interaction of buyers and sellers in a market is fundamental for the determination of :
the price of goods and services .
As the price of a good , service , or resource rises :
the quantity demanded will fall .
When the price of smart phones increases :
the quantity of smart phones supplied will increase .
The price of sugar increases . The law of supply states :
the quantity of sugar supplied will increase
According to the law of supply , as the price of a good , service , or resource rises :
the quantity supplied will increase - and vice versa - all else held constant
In a market , when the price or availability of resources used in the production of a certain good changes .:
the supply curve shifts .
When the number of sellers in a market changes ,:
the supply curve shifts .
There is an increase in the supply of pumpkins . This event can be seen graphically as :
the supply curve shifts to the right .
Two goods are considered substitutes if :
there is a direct relationship between the price of one good and the demand for the substitute .
When eating pizza , you value the first , second , third , and fourth slices of pizza at $ 10 , $ 7 , $ 5 , and $ 3 , respectively . This decrease in the value you place on each additional slice is called diminishing marginal
utility
A market cannot exist :
without individuals and firms that are willing and able to buy a good .
When drawing a supply curve , we always place price on the __ axis and quantity on the __ axis
y ; x
Which of the following would be considered nonprice determinants of the demand for flour ?
•A change in the number of buyers of flour •A change in buyers ' expectation of the price of flour next week •A change in consumer preferences to bake
Which of the following is a possible outcome if a nonprice determinant of supply changes ?
•A decrease in supply at all possible prices •An increase in supply at all possible prices
Which of the following are reasons for the demand curve sloping downward ?
•The substitution effect •The income effect •Diminishing marginal utility
Which of the following are examples of resources ?
•Workers hired to pick grapes at a vineyard •An oven used to bake bread at a bakery
The demand curve for a normal good is downward sloping because
•as prices rise , the purchasing power of each dollar earned falls , and consumers are willing and able to buy less of a good •the benefit of consuming more of a good falls with each additional unit , so the price consumers are willing and able to pay also falls with increased consumption •when consumers purchase substitutes , the quantity demanded of the good falls
Shifts in supply :
•can be parallel •occur when there is a change in the nonprice determinants of supply
Taxes and subsidies matter because they :
•have unanticipated effects on other markets •stimulate production or collect revenue
When the supply curve shifts to the left ,:
•lower quantities of a good , service , or resource are produced at all prices •it is called a decrease in supply