Economics Unit 3

What is the effect on the quantity of DVDs demanded if the price of DVD players increases?

It decreases.

What is the effect on the quantity of DVDs demanded if the price of videos increases?

It increases.

The law of supply states that...

all other things remaining the same, the higher the price, the larger the quantity supplied.

At the equilibrium point, we have...

an equilibrium price and an equilibrium quantity.

If the price decreases, the supply will...

decrease.

If the price decreases, the demand will...

increase.

A price ceiling makes it so buyers have to...

pay less than equilibrium.

Demand is determined by...

price.

Once a market is at its equilibrium price, unless something changes, the ___________________ and ___________________ will not change.

price; quantity

When a product becomes a fad, the demand curve for that product...

shifts to the right.

It costs Balls-R-Us, a supplier of soccer balls, $3.00 to produce each soccer ball and $300.00 to make one hundred soccer balls. It is able to sell these soccer balls for $10.00 each. What is the marginal cost of producing soccer balls?

$3.00

buying factors

Price of related goods Income of consumers Expected future prices Overall population Preferences

A change in any of these factors will cause a change in supply.

Price of the factors of production Price of other goods produced Expected future prices Number of suppliers Technology

This graph shows the supply and demand curve for laptops. Which of the following could be a cause of the shift illustrated in the graph?

The price for manufacturing computer chips, mother boards, and laptop monitors has gone down

The solid black lines in the graph below show the current supply and demand curves for couches. The dotted lines are potential shifts to the supply and demand curves. How would the supply and demand curve need to shift so that the equilibrium price decreases, but the equilibrium quantity stays the same?

a decrease in the demand for couches and an increase in the supply of couches

substitute in production

a good that can be produced instead of the good you are producing

substitute

a good that can be used in place of another good or service (example: song downloads & CD's)

inferior goods

a good that consumers buy less of when they earn more money and more of when they earn less money

complement

a good that is bought along with another good (example: hot dogs & hot dog buns)

complement in production

a good that is produced along with another good

price ceiling

a government regulation that sets the maximum legal price that can be charged for a product

equilibrium

a state of balance between opposing forces or powers (market clearing price)

A shift to the left in the supply curve indicates...

decrease in supply.

A rise in the price of a game of bowling will...

decrease the demand for bowling balls.

A rise in the price of a racquetball game will...

decrease the demand for racquet balls

If the price increases, the demand will...

decrease.

Gruel is an inferior good. Hence, an increase in consumer income...

decreases the demand for gruel

How does an increase in consumer population affect the demand for most products?

demand increases

A surplus will force prices...

down.

A price compromise between buyer and seller is known as a(n)...

equilibrium price.

A rise in the price of a good will shift its supply curve to the right.

false

The law of supply states that as the price of a good rises, the quantity supplied decreases.

false

If the price increases, the supply will...

increase.

Since prices don't favor producers or consumers, they are described as...

neutral.

A price floor makes it so buyers have to...

pay more than equilibrium.

According to the substitution effect, if two items satisfy the same need and the price of one rises,...

people will buy the lower priced item.

supply curve

shows the quantity producers plan to sell at each price; shows the relationship between the quantity of a good supplied and its price

demand curve

shows the relationship between the quantity of a good demanded and its price (As the price (y-axis) rises, the demand (x-axis) decreases.)

categories of related goods

substitutes and compliments

Say that the government imposed a price floor of $200 for gaming systems. If the graph below represented this situation, would there be a shortage or surplus of gaming systems? How much shortage or surplus would there be?

surplus of 30

Relative price is measured in...

terms of other goods.

Demand is measured in...

terms of quantity demanded.

quantity supplied

the amount of a good or service that producers plan to sell during a given amount of time at a particular price

demand

the amount of a good that consumers are willing and able to buy at a given price

The graph below illustrates a shift in supply. Which hypothetical situation is the most accurate cause of this shift?

the cost of lenses used to make the glasses decreased

marginal cost

the cost of producing one more unit of output

price floor

the lowest legal price that can be paid for a good or service; a barrier set by the government so that the price cannot go below that point

supply increases if... (shift to right)

the price of a factor in production falls the price of a substitute in production falls the price of a complement increases the price is expected to fall in the future the number of suppliers increases more efficient technology is developed to produce songs

supply decreases if... (shift to left)

the price of a factor in production rises the price of a substitute in production rises the price of a complement falls the price is expected to rise in the future the number of suppliers decreases

quantity demanded decreases if... (shift to left)

the price of a substitute falls the price of a complement rises income falls (normal goods) the price is expected to fall in the future the price is expected to rise in the future the population decreases

quantity demanded increases if... (shift to right)

the price of a substitute rises the price of a complement falls income rises (normal goods) the price is expected to rise in the future the population increases

At any given price, a surplus of oranges will occur when...

the quantity supplied is greater than the quantity demanded

normal goods

things that consumers will buy if they make enough money or will not buy if they don't make enough money; demand for an item goes up when the income of consumers goes up

A rise in the price of chicken feed shifts the supply curve of chickens leftward.

true

In order to demand a good, a consumer must be both willing and able to buy it.

true

Marginal cost is the cost of producing one more unit of output.

true

The law of demand states that, as the price of a good rises, the quantity demanded decreases.

true

The only factor that can cause a change in quantity demanded is price.

true

A shortage will force prices...

up.

equilibrium point

where the quantity supplied equals the quantity demanded

In order to demand a good, a consumer must be both __________ and __________ to buy the good.

willing; able