Test 1 Ch. 3 Supply and Demand

If the price of jet fuel rises, the supply/demand of airplane trips increases/decreases

supply, decreases

Profit=

total revenue-total cost

Inferior Good

When income increases, demand decreases

Normal Good

When income increases, demand increases

How do we go back to equilibrium price?

automatic adjustment mechanism

If a rise in the price of gasoline decreases the demand for large cars, gasoline and large cars are...

complements

Pizza and hamburgers are substitutes. A rise in the price of pizza raises/lowers the price of a hamburger and increases/decreases the quantity of hamburgers

raises, increases

A change in non-price determinant of supply is a...

shift in supply curve and a change in supply

If supply increases, what is the effect?

shift rightward in supply curve

What is it called when Qd is greater than Qs?

shortage

Profit equation

PxQ-total cost

The law of demand concludes that a rise in the price of a golf decreases/increases the Qd and shifts/movement along the demand curve for golf balls

decreases, movement along the demand curve

Price of wheat rises and quantity of wheat increases. This is a result of...

demand curve shifting rightward

What is it called when Qs is greater than Qd?

excess supply or surplus

Qd=

f(price, price of complements, price of substitutes, income, preferences, expectations, number of consumers)

Qs=

f(price, resource prices, prices of related goods produced, technology, expectations, number of suppliers)

Technological improvement lowers cost of producing coffee. Price of a pound of coffee rises/falls and quantity of coffee increases/decreases

falls, increases

If there is a shortage of a good, the Qd is less/greater than the Qs and the price will fall/rise

greater, rise

An increase in the number of producers of gruel increases/decreases the supply of gruel and shifts the supply curve of gruel rightward/leftward

increases, rightward

An increase in the price of cheese used to produce pizza shifts the supply curve of pizza rightward/leftward and shifts the demand curve for pizza leftward/not at all

leftward, not at all

If there is a surplus of a good, the Qd is less/greater than the Qs and the price will fall/rise

less, fall

A change in price of demand is a...

movement along the demand curve and a change in quantity demanded

A change in price of supply is a...

movement along the supply curve and a change in quantity supplied

Number of firms producing computers decreases. Price of computers rises/falls and quantity of computers increases/decreases

rises, decreases

A change in non-price determinant of demand is a...

shift in demand curve and a change in demand