Ch. 3 Econ 101
According to the law of supply, price and quantity supplied have a(n) .... relationship
positive
According to the law of supply, price and quantity supplied have a(n) ______ relationship
positive
A change in quantity demand (Qd) is caused by an increase or decrease in the ..... of the product under consideration and nothing else
price
Buyers and sellers are brought together in a .....
market
_______ in supply while holding demand constant results in an increase in equilibrium price, but a decrease in equilibrium quantity.
-A decrease (a decrease is illustrated as a shift of the supply curve upward or the left) -A leftward shift (a leftward or upward shift of the supply curve represents a decrease in supply)
The following describes the law of demand
-All other things being equal, as price increases, quantity demanded decreases. -All other things being equal, as price decreases, quantity demanded increases
Government-controlled prices cause:
-Distortions in resource allocation -negative side effects -Surpluses -shortages
The following are determinants of demand:
-Prices of related goods -consumer expectations -number of buyers -consumers' income -consumer tastes
The following are some determinants of supply:
-Technology -Resource prices
The following are examples of markets
-The new york stock exchange -a local gas station -a pay-to-play online gaming site -ebay
From an economic perspective, the following are true of a market:
-The pursuit of buyers and sellers in making themselves better off -It is a virtual and/or physical institution or space -Buyers and sellers interact in their desire to buy and sell a good or service
A change in price of which of the following type of goods affect the demand for another good?
-complementary goods -substitute goods
Government-controlled prices in the form of price ceilings and price floors
-distort resource allocation -produce negative side effects (Negative side effects include shortages, surpluses and distortions of resource allocation.) -stifle the rationing function of prices
The following are some determinants of supply:
-subsidies -taxes
The following consists of a large number of independently acting buyers and sellers who buy and sell standardized products:
A competitive market
The concept of demand can be summarized by a schedule or curve showing the quantity of a product that would be:
Consumed at various possible prices Further explanation: Purchased or consumed represents the demand curve described here
One of the determinants of demand is _____ expectations
Consumer
...... resource prices raise production costs and, assuming a fixed product price, ....... profits
Higher; reduce
The following is not a determinant of demand
Price of substitutes in production Further explanation: Do not confuse the "price of related goods" on the demand side. This clearly states substitutes in production which hint to the supply side of the market.
The following determinant of supply deals with alternative products that can be produced by firms
Prices of substitutes in production
The following specifically refers to demand
The buyer side of any market
What determines market price and equilibrium output in a market
The interaction of buyers and sellers
A decrease in demand while holding supply constant results in:
a decrease in both equilibrium price and quantity
An increase in business taxes causes ..... in supply and will ..... production costs
a decrease; increase
The following refers to a particular apportionment or mix of goods and services most highly valued by society
allocative efficiency
The supply curve is ...... sloping curve
an upward
Quantity demanded is illustrated on the ..... axis, while price is illustrated on the ...... axis
horizontal (x); vertical (y)
A price ..... is the maximum legal price a seller may charge for a product or service
ceiling
Equilibrium price is otherwise known as market-...... price.
clearing
A ........ good is one that is used together with another good
complementary
A _________ good is one that is used together with another good.
complementary
The ...... incurred by firms when producing a good or service arise from the prices of the inputs that are used to produce said good or service
costs of production
A buyer's intentions or plans in regard to the purchase of a product is known as:
demand
A change in the number of buyers will cause a shift in the market ...... curve
demand
An increase in ..... while holding supply constant results in an increase in both equilibrium price and quantity
demand
An increase in ...... while holding supply constant results in an increase in both equilibrium price and quantity
demand
A shortage results from an excess of quantity ......
demanded
With a binding price ceiling, quantity ....... will exceed quantity ......, resulting in a persistent shortage of the product
demanded; supplied
Consumers experience ...... marginal utility the more they consume of a particular good or service
diminishing
In free markets, though prices will rise and fall, .... and ...... will always be achieved
equilibrium quantity; equilibrium price
A price ...... is a minimum price fixed by the government, generally imposed above the price, which is otherwise known as the equilibrium price
floor
For most, but not all products, a rise in consumer's ..... causes an increase in demand
income
The vast majority of goods that are not related to one another are called ...... goods
independent
Goods whose demand decreases when consumers' incomes rise and increase when consumers' income fall are called ..... goods
inferior
The law of demand describes a(n) ...... relationship between the price of a good or service and the quantity demanded of that good or service.
inverse Further explanation: The law of demand describes the behavior of consumers. It states that when price falls, quantity demanded rises and when price rises, quantity demanded falls. Note the opposite (negative/inverse) relationship between price and quantity demanded.
When two variables are being examined, and one variable moves one way and the other variable moves in the opposite direction, this is called a(n):
inverse relationship
A demand curve shows the plotted:
inverse relationship between price and quantity demanded for a product
If costs of production rise, the producer has an incentive to produce ..... output
less Further explanation: When the cost of resources such as, but not limited to raw materials and labor rise, it is more cost prohibitive to produce. Therefore, producers adjust output by producing less.
The income effect is best described as ..... increasing the purchasing power of income, enabling consumers to purchase ...... of a product and vice versa
lower prices; more
Diminishing ...... states that, in any specific time period, buyers will derive less satisfaction from each additional unit of the product consumed
marginal utility
The production of a good or service in the least costly way is known as ...... efficiency
productive
The interaction of buyers and sellers determines equilibrium price and equilibrium
quantity Further explanation: Changes in supply and demand determine equilibrium price and quantity
The price of ..... goods is a determinant of demand
related
When each additional worker of a firm produces less additional output than previously added workers, then the marginal cost of additional units of output:
rises
The law of supply states that as price ......, the quantity supplied (Qs) rises; as price ...... the quantity supplied falls
rises; falls
Which of the following refers to government financial assistance for the production of a good which lowers producers' costs and increases supply?
subsidy
A surplus is also known as an excess of .....
supply
Improvements in technology are a determinant of ......
supply
Market ..... is a schedule or curve showing the carious amounts of a product that producers are willing and able to make available for sale at each possible price during a specific period
supply
Producer expectations of future prices are a determinant of .......
supply
Substitution in production is a determinant of .....
supply
The number of sellers or competitors in a market is a determinant or shifter of the _____ curve.
supply
An increase in ..... while holding ...... constant results in a decrease in equilibrium price, but an increase in equilibrium quantity
supply; demand
An increase in ...... while holding .... constant results in a decrease in equilibrium price, but an increase in equilibrium quantity
supply; demand