Microeconomics Quiz 1
allocate resources
the main role of a market is to...
demand
the maximum amount of a product that buyers are willing to purchase over some period at various prices (ceteris paribus)
Lindsay offers to buy more sticks of chewing gum at $1 than at $2.
Which statement illustrates the law of demand?
surplus
too much stuff is available (quantity supplied>quantity demanded)
prices
what sends signals in free-market economies
market demand
horizontal summation of all individual demand curves is...
rationality
how people make choices based on perceived benefits and costs
efficiency
how well resources are used and allocated
the price system
in a market based economy, scarce resources are allocated by...
markets
institutions that bring buyers and sellers together
how much of a product to produce
prices do NOT help consumers decide:
simplifying the model down to its basic relevant elements
the MOST common way in which economists model a problem is by:
equity
the fairness of various issues and policies (not often used in economics)
willingness to pay
the highest value that a consumer believes a good or service is worth is...
price
the only way to change quantity demanded
is the horizontal summation of individual demands
a market demand curve:
people exchange money for goods and services
a market exists when...
technology
a shift in the demand curve is NOT caused by:
horizontal summation
adding the # of units of the product that will be supplied and purchased at each price is...
normative question
addresses society's beliefs about what should or shouldn't happen (opinion/equity related)
law of supply
as prices increase, quantity supplied rises, and as price declines, quantity supplied falls
law of demand
as the prices of a good fall, the quantity demanded of that good rises (price goes up = quantity demanded goes down; vise versa)
positive question
can be answered by available info or facts (fact/efficiency based)
inferior good
demand decreases as income rises (ex: we will buy less ramen after we graduate college bc we can afford better food)
normal good
demand increases as income rises (ex: we will buy a nicer car if we get a raise/higher income)
1) tastes & preferences 2) income 3) prices of related goods (substitutes and complements) 4) # of buyers 5) future expectations
determinants of demand
1) new technology 2) cost of resources 3) price of related commodities (goods/services) 4) future expectations 5) # of sellers 6) taxes & subsidies
determinants of supply:
supply
maximum amount of a product that sellers are willing to be able to provide over some period at various prices (ceteris paribus) (this is also from the seller's perspective)
shortage
not enough stuff is available (quantity demanded>quantity supplied)
price is on the vertical axis and quantity demanded is on the horizontal axis
on a demand curve:
higher; rainy
people's willingness to pay for umbrellas is MOST likely _______ on a _____ day
differs; differs
willingness to pay _________ from person to person and __________ under varying circumstances