Overview: Chapter 4

B. Supply, quantity demanded

An increase in ________ will cause a movement along a given demand curve, which is called a change in ________. a. supply, demand b. supply, quantity demanded c. demand, supply d. demand, quantity supplied

b. Supply, lower The supply of gasoline increases because of the new oil reserve causing the equilibrium price to decline.

The discovery of a large new reserve of crude oil will shift the ___ curve for gasoline, leading to a ___ equilibrium price. a. Supply, higher b. Supply, lower c. Demand, higher d. Demand, lower

b. the price of hamburgers

A change in which of the following will NOT shift the demand curve for hamburgers? a. the price of hot dogs b. the price of hamburgers c. the price of hamburger buns d. the income of hamburger consumers

Price takers (not makers) That is, both must accept the price as determined by the broader market.

Both buyers and sellers in perfectly competitive markets are price____

Lower, buyers to offer higher prices Prices below the equilibrium price generate excess demand because buyers are willing to purchase more pizzas than sellers are willing to sell—the quantity supplied is less than the quantity demanded at that price

If a shortage exists in the pizza market, then the current price must be _____ than the equilibrium price. For the market to reach equilibrium, you would expect_____

a. Prices and quantities both rise If the demand for a good rises when income falls, the good is called an inferior good. An increase in demand results in a rise in both the equilibrium price and quantity of a good

If the economy goes into a recession and incomes fall, what happens in the market for inferior goods? a. Prices and quantities both rise b. Prices and quantities both fall c. Prices rise, quantities fall d. Prices fall, quantities rise

d) The demand curve shifts to the right. When a fall in the price of one good reduces the demand for another good, the two goods are called substitutes. If movie tickets and DVDs are substitutes and the price of DVDs increases, this means the demand for movie tickets will also increase. This results in the demand curve shifting to the right.

Movie tickets and DVDs are substitutes. If the price of DVDs increases, what happens in the market for movie tickets? a. The supply curve shifts to the left b. The supply curve shifts to the right c. The demand curve shifts to the left d. The demand curve shifts to the right

Identical goods and services, and there are many producers and sellers

What do all producers sell in a perfectly competitive market?

Shifts by the larger magnitude If the supply curve shifts by a larger magnitude than the demand curve, the downward pressure on price that results from an increase in supply overpowers the upward pressure on price that results from an increase in demand. On the other hand, if the demand curve shifts with a larger magnitude than the supply curve, the upward pressure on price that results from an increase in demand overpowers the downward pressure on price that results from an increase in supply.

When both the demand and supply curves shift, the curve that _____ determines the effect on the undetermined equilibrium object.

c. an increase in the price of grapes, an input to jelly If a change occurs in any of the factors that determine supply - such as an increase in the price of grapes, an input to jelly-the result is a shift of the supply curve. In this case, the change in he price of jelly causes the supply curve of jelly to fall. This leads to an increase in the equilibrium price of jelly, and a decrease in the equilibrium quantity of jelly sold

Which of the following might lead to an increase in the equilibrium price of jelly and a decrease in the equilibrium quantity of jelly sold? a. an increase in the price of peanut butter, a complement to jelly b. an increase in the price of Marshmallow Fluff, a substitute for jelly c. an increase in the price of grapes, an input to jelly d. an increase in consumers' incomes, as long as jelly is a normal good

The market for lettuce has millions of consumers who buy lettuce, as well as thousands of farmers producing and selling lettuce. These consumers and producers take the market price as given and make their production and consumption decisions based on this prevailing price.

Why does the market for lettuce exhibit the two primary characteristics that define perfectly competitive markets?