Econ Chapter 3

The market economy is often called the price system because

prices provide information for both buyers and sellers

The law of supply says

producers are willing to offer more for sale if the price increases

If the price of shoes is $60/pair, the __________ will be 10 pairs of shoes

quantity demand

If the price of shoes is $60/pair, the __________ will be 30 pairs of shoes

quantity supplied

According to the law of supply, as price increases

quantity supplied will rise

A graphical representation of how much a seller would be willing and able to bring to the market at various prices is known as the

supply curve

Labor costs increase at General Foods cereal plants

supply decreases; quantity supplied decreases; price increases

Better technology lowers the cost of producing computers so that

supply increases; quantity supplied increases; price decreases

If more auto manufacturers start producing hybrid cars

supply increases; quantity supplied increases; price decreases

The basic proposition of the law of demand is that

as the price of a good increases, buyers want to purchase less.

In a market economy, there is a ______________ relationship between price and quantity supplied

positive

If the price of shoes is $40/pair, the quantity supplied will be __________ pairs of shoes

20

The table shows the demand of three individuals in a market. Assuming these are the only buyers, what is total market demand if the price is $20?

5 units

If the local pizzeria has only two buyers, Jake and Sue, for its calzones, what is the market demand for calzones at each of the prices listed? Qj is the quantity demanded at each price below by Jake, and Qs is the quantity demanded at each price by Sue.

6, 4, 2, 1

What do prices do?

Allow sellers to determine what goods to sell, help buyers find possible substitute goods, and contain information useful for all people involved in a transaction

In the table, the equilibrium price is ________, and the equilibrium output is ___________

$10; 60

According to the figure, the market quantity demanded at $20 is

10

If the price of shoes is $40/pair, the quantity demand will be __________ pairs of shoes

15

In the table, at a price of $5

A shortage of 40 units occur

Ben likes carrots less today than he did yesterday.

Ben is now willing to pay less than before for carrots

What would not be considered a market transaction?

Payment made to a disaster victim

A shift to the right of the demand curve could be caused by

an increase in income

Prices perform what functions?

Signal entrepreneurs to enter or leave a market, give buyers an easy means of comparing goods that might substitute for each other, and signal potential employees to enter or leave the labor market as a supplier for a particular job

If the price of HDTV's falls:

The quantity supplied of HDTV's declines

The shift of the supply curve from A to B is an example of

a change in supply

A shift to the right of the demand curve would be caused by anything except

a decrease in the population

When one of the determinants of demand changes, that will result in:

a shift of the demand curve

In the table, at a price of $12

a surplus of 20 units take place

A market will

always trend towards equilibrium

"Supply" refers to the

amount of product sellers are willing and able to sell at various prices

Butter is a substitute for margarine. If the price of margarine drops, we would expect to see:

both the price of butter and the quantity go butter traded rise

College classes and college textbooks are

complementary goods

A factor that can shift a demand curve to the left for an inferior good is a

decrease in population

What might be likely to effect an increase in the price of computer software upon the market for laptop computers?

decreased equilibrium price and decreased equilibrium quantity

Consumers expect the price of milk to decrease shortly. What happens in the short run?

demand decreases; quantity demanded decreases; price decreases

There are more baby boomers in the population than there are people already retired. Once the baby boomers start to retire, what happens to the market for retirement homes

demand increases; quantity demanded increases; price increases

A decrease in the quantity supplied of iPods is caused by a

drop in the prices of iPods

Determinants of supply include all of the following except

income

A demand curve represents

indirect relationship between price and quantity demanded

An item whose demand rises as people's incomes fall is known as a(n) ________ good.

inferior

A ____________ is an institution that brings buyers and sellers together so they can interact and transact with each other

market

In moving along a supply curve, which of the following is not held constant

market price of good

An increase in the supply of popcorn indicates that the producers of popcorn are willing to sell ____________ at all prices, and the supply curve for popcorn shifts ___________

more popcorn; rightward

A market exists when

people exchange money for goods and services

The state of Florida was experiencing a period of drought. The farmers were anticipating an increase in the cost of growing oranges. This would have caused a decrease in the

supply of oranges

A decrease in demand means

the demand curve has shifted to the left

If the Surgeon General announced that wearing baseball caps will eliminate dandruff, then, ceteris paribus, the:

the equilibrium price of baseball caps would increase

Gasoline is produced from crude oil. All things equal, if the supply of crude oil falls

the equilibrium price of gasoline will increase and the equilibrium quantity will decrease

When economists refer to a "market demand" curve, we know it represents

the horizontal summation of individual demand curves

The graph represents

the law of demand

An increase in price will lead to an increase in quantity supplied. This statement is:

the law of supply

The graph represents (2)

the law of supply

According to the law of supply, individuals will supply more of a good when

the prices rise

In citing the ceteris paribus condition for the law of demand, the only two variables that change are

the product's price and the quantity demanded for the product

"Demand" refers to

the products buyers and are willing and able to purchase at various prices in a given period of time.

The concept of demand is

the quantities of a good or a service that people will buy at various prices

A technological advance causes

the supply curve to shift to the right