Macro Supply and Demand review

What are the characteristics of a market economy?

Each individual makes their own production and consumption decisions.

Why does an increase in demand lead to an increase in price and quantity?

The increase in price acts as an incentive for suppliers to increase the quantity supplied.

_____ is a graph plotting the total quantity of an item demanded by the entire market, at each price.

The market demand curve

When the price is below equilibrium, a:

shortage leads to price increases.

Prices rise during a shortage because:

suppliers realize they can raise their prices and still sell all their goods and earn a higher profit.

Input prices and productivity are shifters of:

supply.

The tendency for quantity supplied to be higher when the price is higher is called:

the law of supply.

_____ are those goods you buy less of when your income rises.

Inferior goods

To verify the movement of the demand curve, if the only thing that's changing is the price, then you're thinking about a:

movement along the demand curve.

All the following are factors that may shift an individual demand curve EXCEPT a change in:

the price of the good.

_____ summarizes selling plans of a business.

Individual supply curve

Which of the following is correct about the market for red delicious apples?

It is perfectly competitive, because many consumers want an identical good.

When new businesses enter the market, they _____ the total quantity supplied at each price, shifting the supply curve to _____.

increase; the right

To maximize your economic surplus, you should apply the Rational Rule for Buyers by continuing to buy until _____.

Price = Marginal benefit

When is it helpful to use the morning-evening method?

When analyzing a graph with both a supply and demand shift

All of these are examples of surpluses EXCEPT:

a pizza shop running out of pizza with potential customers still in line.

A firm in a perfectly competitive market sets its price _____ the prices of its competitors because all firms are selling _____ product(s).

as same as; an identical

Supply and demand can also be thought of as:

cost and benefit.

The factors that can change _____ will shift your supply curve.

marginal costs

When your suppliers increase the prices of your inputs, they increase your _____, and this will shift your supply curve to _____.

marginal costs; the left

Both the market demand curve and the individual demand curve have _____on the vertical axis and _____ on the horizontal axis.

price; quantity

Managers in perfectly competitive markets don't spend a lot of time strategizing about _____ because _____.

price; their best price is the market price

Movement along the demand curve due to a change in price is referred to as a change in _____.

quantity demanded

All of these are examples of market economies EXCEPT:

a country's prime minister decides that she knows what is best for her country, and dictates all factors of production for her nation.

When existing businesses leave the market, they _____ the total quantity supplied at each price, shifting the supply curve to _____.

decrease; the left

A(n) _____ in supply causes the supply curve to shift to the right where a(n) _____ in supply causes the supply curve to shift to the left.

increase; decrease

Marginal product is the _____ in output that arises from an additional unit of an _____, like labor.

increase; input

The independence principle tells the sellers that there are many other factors beyond price that can either increase or decrease the market supply. Under this circumstance, you would see that:

the supply curve shifts either to the left or to the right.

The law of supply is:

the tendency for quantity supplied to be higher when the price is higher.

_____ in demand is a shift of the _____ to the left.

A decrease; demand curve

When you change the quantity of output you produce, _____ costs will not vary with the units of outputs.

fixed

When your suppliers decrease the prices of your inputs, they decrease your _____, and this will shift your supply curve to _____.

marginal costs; the right

Gas purchased tomorrow is a substitute for gas purchased today, and a _____ price expected tomorrow _____ demand for gas purchased today.

higher; increases

A brick-and-mortar coffee shop where prices are posted is an example of a(n) _____.

market

To forecast the total quantity supplied, simply locate the price on the _____ and then look across until you hit the supply curve and finally look straight down to the _____ for your answer.

vertical axis; quantity

_____ is a shift of the demand curve to the right, and _____ is a shift of the demand curve to the left.

An increase in demand; a decrease in demand

Why do you have to consider the demand of all potential customers when estimating demand, rather than just looking at current customers?

Because changes in price can change who your customers are.

To distinguish between movements along a supply curve and shifts in supply curves, if the only thing that's changing is the price, then you're thinking about:

a movement along the supply curve.