Econ Ch. 3
What is the determinant of supply dealing with alternative products that can be produced by firms?
price of other goods
What is supply?
The production of a product, whereas demand refers to the buyers who consumer the product.
T&F: A substitute good is one that is used in place of another good.
True
T&F: A surplus is when quantity supplied exceeds quantity demanded.
True
T&F: Equilibrium price is the price where the intentions of buyers and sellers match.
True
T&F: Price and quantity supplied are directly related.
True
T&F: Resource costs or changes in these costs to production are responsible for shifts in the supply curve.
True
T&F: The determinants of demand, other things equal, are assumed to be constant when a demand curve is drawn or computed.
True
T&F: The number of buyers in a market is a determinant of demand.
True
T&F: The prices of factor inputs used in the production process help determine the costs of production incurred by firms.
True
Market supply
What is a schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each given possible price during a specific period?
A producer's willingness and ability to produce a specific quantity of a good or service due to a change in price is referred to as ___.
a change in quantity supplied
Why are government goods and services are not free because:
a cost is borne by society in utilizing these resources to produce any good or service; consumers and businesses pay taxes to receive the goods or services
Producer expectations of future prices are a determinant of ___.
supply
Which way does the law of demand curve slope?
downward sloping curve
What factors do businesses purchase from consumers?
entrepreneurial ability, land, capital, and labor
Which of the following would most likely lead to a decrease in demand?
A decrease in fertility rates
What results when there is a shortage?
An excess of quantity demanded
What causes a change in quantity supplied under consideration of nothing else changed?
An increase or decrease in the price of the product
What is a market?
An institution or mechanism that brings buyers and sellers into contact.
What goods are used together with other goods?
Complementary
Flow in a circular flow model is:
Counterclockwise
What is a graphical representation of the relationship between price and quantity?
Demand curve
What organizes the relationship between price and quantity in a tabular format?
Demand schedule
What curve represents the inverse relationship between price and quantity demanded?
Downward sloping curve
Due to scarce resources, every individual, whether rich or poor, is faced with an _____ when choosing to produce or consume more of one good over another.
Opportunity cost
Price and quantity supplied have a ____ relationship.
Positive
On a supply curve, what are the labels of each axis?
Price - vertical (y) Quantity - horizantal (x)
What is equal at equilibrium?
Quantity demanded and quantity supplied
Which curve is an upward sloping curve?
Supply curve
Which curve shows the seller's minimum acceptable price for each unit of the product?
Supply curve
The concept of demand can be summarized by a schedule or curve showing the quantity of a product that would be:
consumed at various possible prices
A decrease in the number of buyers in a market causes a ____ in demand.
decrease
A buyer's intentions or plans in regard to the purchase of a product is:
demand
What curve represents the amount of a product that will be purchased at various possible prices?
demand curve
The demand curve measures quantity ___ on the horizontal axis and ____ on the vertical axis.
demanded, price
The "ceteris paribus" in the relationship between price and quantity demanded are called:
determinants of demand
Changes in ___ about future price of a product may affect the producer's current willingness to ___ that product.
expectations, supply
The "ceteris paribus" assumption is important to the law of demand because:
factors other than the price of the product affect the amount of a product purchased
If a decrease in demand is greatest than a decrease in supply, equilibrium price will ___.
fall
What decreases demand?
falling incomes and the product is a normal good, unfavorable change in consumer tastes, and a decrease in the price of a substitute good
In a circular flow model, consumers sell resources to and buy products from ____.
firms
Governments use resources to serve public needs to achieve the goal of:
increasing welfare
The market curve is the summation of all ____ demand curves for a good or service.
individual
The law of demand describes an ____ relationship between the price of a good or service and the quantity demanded of that good or service.
inverse
What is an inverse or negative relationship between price and quantity demanded?
law of demand
As firms leave an industry supply decreases, causing the supply curve to shift to the ___.
left
If costs of production rise, the producer has an incentive to produce ___ output at every possible cost.
less
If the government subsidizes the production of a good, it in effect ____ the producer's costs and ____ supply.
lowers, increases
The ____ ensures that the right amount of a particular product gets produced.
market mechanism
Buyers and sellers are brought together through:
markets
An inverse relationship between two variables is a:
negative relationship
Products whose demand varies directly with changes in money or income are called:
normal or superior goods
The products whose demand varies directly with changes in money or income are..
normal or superior goods
What will cause a change in supply rather than a change in quantity supplied?
number of sellers, technology, producer expectations
What is the only factor that causes a movement along the supply curve?
price
The interaction of buyers and sellers determines equilibrium ___ and equilibrium ___.
price, quantity
What is specialization about in an individual or firm that is using available resources to?
produce one or only a few goods and services
The function of businesses in the circular flow model is to ___ factors and ___ products.
purchase, sell
A change in ____ is caused by an increase or decrease in the price of the product under consideration and nothing else.
quantity demanded
An increase in a product will change the ____ for that product while an increase in the price of a substitute will change the ___ for the first product.
quantity demanded, demand
The fundamental characteristic of demand, other things equal, is that as the price falls, the quantity demanded for a product ___.
rises
When all other things equal, when a buyer's income rises, the willingness and ability to buy a normal product ___.
rises
The law of supply states that as price ___, the quantity supplied rises; as price ___, the quantity supplied falls.
rises, falls
A ___ the supply curve represents a change in supply while a ___ the supply curve represents a change in the quantity supplied
shift of, movement along
At equilibrium price, there is neither a ____ nor a ____ because the quantity demanded by consumers at a specific price is identical to the quantity supplied at the same time.
shortage, surplus.
An increase in ____ while holding ____ constant results in a decrease of equilibrium price, but an increase in equilibrium quantity.
supply, demand
An increase in ____ while holding the demand constant ____ equilibrium price and ____ equilibrium quantity.
supply, lowers, raises
A ___ prompts sellers to lower the price to encourage buyers by increasing the incentive to buy.
surplus
Which of the following describe the effects on equilibrium price and equilibrium quantity as a result of a simultaneous and proportional increase in supply and demand?
the change in price is indeterminate and quantity rises
What happens when consumers purchase a good or service?
the level of utility or satisfaction increases
How do improvements in productive technology enable firms to produce more units of output?
utilizing less resources
What illustrates when a good and its complement resemble a good relationship?
when the price of tuition decrease, the demand for textbooks increases; when the price of lettuce increases, the demand for salad dressing decreases
T&F: If there is a change in demand or a change in supply, it will not disturb equilibrium.
False
T&F: The market supply curve is derived by summing up the producers' individual demand curves for a good or service.
False
T&F: The sale of farm equipment takes place only in the factor market.
False
____ factor prices raise production costs and will cause supply to shift ____
Higher, left
A shift leftward in supply while demand is constant results in:
Increase in equilibrium price and a decrease in equilibrium quantity.
When producers use resources efficiently their goal is to?
Increase their profit
When the demand curve shifts upward or downward, this occurs because:
a factor other than price affects consumption of a good or service
What is the law of demand?
all other things being equal, as price increase, quantity demanded decrease; all other things being equal, as price decrease, quantity demanded increases
In markets, when prices rise and fall, what will be achieved?
equilibrium quantity and equilibrium price
A rise in income causes an ____ in demand for most products. A fall in income causes an ____ in demand for most products, other things equal.
increase, decrease
A shift in the supply curve to the right reflects an ____ in supply, while a shift to the left reflects a ____ in supply.
increase, decrease
A favorable change in consumer tastes and preferences for a product will ____ demand, shifting the demand curve to the ____.
increase, right
T&F: A change in one of the determinants of supply results in a movement along the supply curve.
False
T&F: A change in supply is represented by a movement along the curve, not a shift of the curve.
False
T&F: A complementary good is one that is used in place of another good.
False
T&F: At equilibrium quantity there is either a shortage or surplus.
False
T&F: The supply curve is an upward sloping curve because as price decreases, the producer will be willing to supply more of the product.
False
A surge in demand while holding supply constant results in an ___ in both equilibrium price and quantity.
increase
When the price of one product rises, the demand for its substitute will:
rise
Which type of goods affect the demand for a product due to a change in their price?
substitute and complementary goods
A consumer's willingness to purchase in a market must be supported by the ability to make the purchase as evidenced by:
the necessary income
Substitute goods and complementary goods refer to which determinant of demand?
the price of related goods
A decrease in demand while holding supply constant results in:
a decrease in both equilibrium price and quantity
Who is involved in a circular flow model?
consumers, businesses, government, and global actors
In a circular flow model, the market economy creates:
continuous, repetitive flows of goods and services and factors
If the increase in demand is greater than the decrease in supply, the equilibrium quantity will ___.
rise