Module 3

When a shortage occurs, as the price moves toward equilibrium what will happen to quantity demanded and quantity supplied?

Either: 1. quantity demanded falls and quantity supplied rises 2. quantity demanded rises and quantity supplied rises 3. quantity demanded falls and quantity supplied falls (Haven't figured it out yet)

A decrease in demand signifies that at ______ price consumers will buy ______

1. every 2. less

An increase in demand signifies that at _______ price consumers will buy _____

1. every 2. more

A price ceiling occurs when a price is ________ than equilibrium price and quantity supplied is ________ than quantity demanded.

1. higher 2. greater

When there is a technological improvement in the cell phone market, at every price producers will produce ______, and at every quantity the market price will be ________.

1. more 2. lower

A decrease in demand is shown by

A shift of the demand curve to the left.

A increase in demand is shown by

A shift of the demand curve to the right.

normal goods (superior goods)

Consumers buy more as their income increases and less as their income decreases; there is a direct relationship between income and quantity demanded. For example: restaurant meals.

True or false: A supply schedule is a table that shows the quantity supplied of a product at one price.

False

True or false: An equilibrium price in a market is where quantity demanded exceeds quantity supplied.

False

True or false: If a surplus in a market occurs, price will rise.

False

True or false: If quantity supplied equals quantity demanded in a market, the price will fall.

False

True or false: Price ceilings create shortages where quantity supplied exceeds quantity demanded.

False

True or false: Price elasticity of demand measures how responsive producers are to a change in price.

False

True or false: Price elasticity of supply measures how responsive consumers are to a change in price.

False

True or false: When the price of a complementary good increases the demand curve for the original product will increase and price and quantity of the product will increase.

False

True or false: When the price of a substitute increases the demand curve for the original product will decrease and price and quantity of the product will decrease.

False

True or false: When there is a technological improvement for a product, the supply curve shifts to the right and price increases while quantity decreases.

False

A maximum legal price established by the government is a

Price ceiling

True or false: A supply schedule is a table that shows the quantity supplied of a product at various prices.

True

True or false: An equilibrium price in a market is where quantity demanded equals quantity supplied.

True

True or false: Demand, illustrated by a demand curve, is the quantity of a good or service that consumers desire at various prices.

True

True or false: Elasticity measures the responsiveness of one thing to changes in another.

True

True or false: Price floors create surpluses where quantity supplied exceeds quantity demanded.

True

True or false: The law of demand states that as the price of a product decreases the quantity demanded increases.

True

True or false: When the price of a substitute increases the demand curve for the original product will increase and price and quantity of the product will increase.

True

True or false: A change in demand is illustrated by the curve shifting.

True.

True or false: A change in supply is illustrated by a shift of the supply curve.

True.

Illustrating the law of supply, a supply curve typically is

Upward sloping

Conditions for demand are consumers

Willingness and ability to buy

An increase in the number of sellers in a market will cause

a shift of the supply curve to the right

The law of __________________ says that the more you do something, the harder it is to keep doing it. Therefore, the returns for doing it diminish.

diminishing returns

The relationship between price and quantity supplied is typically ______.

direct

When the price of tennis rackets increases, what happens in the market for tennis balls?

demand decreases, decreasing price and quantity

Assume that product X is an inferior good. When income increases, what will happen to the demand for product X, and the price and quantity of product X?

demand decreases, price and quantity decrease

What happens in the market for shoes when the consumer income increases and shoes are a normal good?

demand increases, increasing price and quantity

When moving up along an existing supply curve, all variables other than price are

either fluctuating or held constant (not sure)

Factors that determine elasticity of demand include which of the following?

either: 1. availability of substitutes, technology, share of budget 2*. availability of substitutes, luxury or necessity, share of budget (most likely) * 3. availability of normal goods, luxury or necessity, share of budget

If quantity supplied increases 20% when price increases 10%, price elasticity of supply is

elastic

f a price elasticity of demand value is greater than 1, the demand is ______.

elastic

When quantity supplied equals quantity demanded the market is in _________.

equilibrium

With a shortage, as prices rise quantity demanded ______.

falls

True or false: Price floors create surpluses where quantity demanded exceeds quantity supplied.

false

In the product market consumers demand

goods and service

A surplus exists in a market when the price is

higher than the equilibrium price.

Improvements in technology cause supply to __________

increase.

If a 5% change in the price of a product causes a greater than 5% change in quantity demanded, the demand is ______

inelastic

When consumers' income increases and they purchase less of a product, the product is a/an ______.

inferior good .

The relationship between price and quantity demanded is typically

inverse

A shortage exists in a market when the price is

lower than the equilibrium price.

A minimum legal price established by the government is a

price floor

With a newspaper headline suggesting additional health benefits from eating apples, based on the change in demand in the apple market, price and quantity will change in what ways?

price increases and quantity increases

When the supply and demand curves intersect

quantity supplied equals quantity demanded at the equilibrium price

When quantity demanded exceeds quantity supplied the market is in _______.

shortage.

Assume that the number of sellers in a market increase, what will happen to the supply curve for the product, and what will happen to the price and quantity in the market?

the supply shifts to the right, price will decrease and quantity will increase