MICROECONOMICS Chapter 4 Quiz

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perfectly competitive

1) the goods offered for sale are all exactly the same 2) the buyers and sellers are so numerous that no single buyer or seller has any influence over the market price

Three Steps to Analyzing Changes in Eq'm

1. Decide whether event shifts S curve, D curve, or both. 2. Decide in which direction curve shifts. 3. Use supply-demand diagram to see how the shift changes eq'm P and Q.

If the price of hot dogs were to decrease, which of the following changes would we expect to occur in the hot dog bun market?

But more buns, shifts right

If the price of hot dogs increases, the demand for hot dog buns will

Decrease, shifts left

In inferior good, if people's incomes go up, they want

Less inferior goods, shifts left.

Number of buyers (decreases)

Less people demand, D curve shifts left

If tastes go away from a good/service

Less people to buy, shifts left

Number of buyers (increases)

More people demand, D curve shifts right

If tastes go toward a good/service

More people will buy, shifts right

Demand for an INFERIOR good is ____ related to income

Negatively related to income

If the price of Pepsi increases then there will be _____ of Pepsi

People who buy more coke, shifts right

If the price of Pepsi decreases,

People will buy more Pepsi and less coke, shifts left

These equilibrium prices are

Signals that guide economic decisions and thereby allocate resources.

In normal goods, if people's incomes go down, they want

Want less normal goods, shift to left.

In inferior goods, if people's incomes go down, they want

Want more goods, shifts right

In normal goods, if people's incomes go up, they want

Want more normal goods, shift to right.

Market

a group of buyers and sellers of a particular good or service.

demand schedule

a table that shows the relationship between the price of a good and the quantity demanded.

Two goods are complements if

an increase in the price of one causes a fall in demand for the other

Two goods are substitutes if

an increase in the price of one causes an increase in demand for the other

quantity demanded

of any good is the amount of the good that buyers are willing and able to purchase.

competitive market

one with many buyers and sellers, each has a negligible effect on price.

Markets are usually a good way to

organize economic activity

Demand for a normal good is __ related to income

positively

In market economies,

prices adjust to balance supply and demand

Law of Demand

the claim that the quantity demanded of a good falls when the price of the good rises, other things equal.

Excess demand

when quantity demanded is more than quantity supplied


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