Ch 4 Summary (ECON)
At the equilibrium price, the quantity demanded ____ the quantity supplied.
equals
What happens when the market price is above the equilibrium price?
there is a surplus of the good, which causes the market price to fall
In a competitive market, what types of people are there and what type of influence do they have on the market price?
(1) buyers and sellers (2) little or no influence on market price
For every good in the economy, what does the price ensure?
that supply and demand are in balance
What does the equilibrium price determine?
how much of the good buyers choose to consume and how much sellers choose to produce
What does the demand curve show?
how the quantity of a good demanded depends on the price
What does the supply curve show?
how the quantity of a good supplied depends on the price
What are the 3 steps to analyze how any event influences a market?
(1) decide whether the event shifts the supply curve or the demand curve (or both) (2) decide in which direction the curve shifts (3) compare the new equilibrium with the initial equilibrium
In addition to price, what are other determinants of how much consumers want to buy and if one of these changes, what happens to the demand curve?
(1) income, the prices of substitutes and complements, tastes, expectations, and the number of buyers (2) the demand curve shifts
In addition to price, what are other determinants of how much producers want to sell and if one of these changes, what happens to the supply curve?
(1) input prices, technology, expectations, and the number of sellers (2) the supply curve shifts
What are the characteristics of a perfectly competitive market?
(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
According to _______, as the price of a good _____, the quantity demanded ____. What happens to the demand curve as a result of this law?
(1) the law of demand; falls; rises (2) the demand curve slopes downward
What is the supply-and-demand diagram used for?
(1) to analyze how any event influences a market (2) to examine how the event affects the equilibrium price and quantity
Make up an example of a monthly supply schedule for pizza, and graph the implied supply curve. Give an example of something that would shift this supply curve, and briefly explain your reasoning. Would a change in the price of pizza shift this supply curve?
See here: https://www.chegg.com/homework-help/questions-and-answers/assignment-2-1-make-example-monthly-demand-schedule-pizza-graph-implied-demand-curve-give--q51562043
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. supply, lower The supply curve for gasoline shows the relationship between the price of gasoline and the quantity of gasoline supplied by production, assuming that all the determinants of supply are held constant. The following list displays determinants of supply, which are the factors that affect the quantity of gasoline producers want to sell at a given price: FACTORS THAT DETERMINE SUPPLY -Price of inputs -Production technology -Number of producers -Expectations of producers Therefore, if the price of gasoline changes, the result is a movement along the supply curve from the old place to the new one. However, if a change occurs in any of the factors that determine supply, such as the discovery of a large new reserve of crude oil, the result is shift of the supply curve. In this case, the supply of gasoline increases because of the new oil reserve causing the equilibrium price to decline.
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, quantity demanded Demand refers to the position of the demand curve Quantity demanded refers to the amount consumers wish to buy Supply refers to the position of the supply curve Quantity supply refers to the amount of supplies you wish to sell In this case, an increase in supply will cause the equilibrium price to decrease, resulting in a movement along the demand curve. The demand curve itself remains unchanged, but the quantity demanded is affected.
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 better, 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 into jelly d. an increase in consumers' incomes, as long as jelly is a normal good
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
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
c. the price of hamburger buns The demand curve for hamburgers shows the relationship between the price of hamburgers and the quantity of hamburgers demanded by consumers, assuming that all the determinants of demand are held constant. The following list displays determinants of demand, which are the factors that affect the quantity of hamburgers consumers want to buy at a given price: FACTORS THAT DETERMINE DEMAND -Price of a related good (complement or substitute) -Income of consumers -Tastes of consumers -Number of consumers -Expectations of consumers Therefore, if the price of hamburgers changes, the result is a MOVEMENT along the demand curve from the old price to the new one. However, if a change occurs in any of the factors that determine demand - such as the price of hot dogs ( a substitute), the price of hamburger buns (a complement), or the income of hamburger consumers - the result is a shift of the demand curve
In market economies, prices are what?
the signals that guide economic decisions and thereby allocate scarce resources
What happens when the market price is below the equilibrium price?
there is a shortage, which causes the market price to rise
Make up an example of a monthly demand schedule for pizza, and graph the implied demand curve. Give an example of something that would shift this demand curve, and briefly explain your reasoning. Would a change in the price of pizza shift this demand curve?
See here: https://www.chegg.com/homework-help/questions-and-answers/assignment-2-1-make-example-monthly-demand-schedule-pizza-graph-implied-demand-curve-give--q51562043
Economists use what model to analyze competitive markets?
The model of supply and demand
If the economy goes into a recession and incomes fall, what happens in the markets for inferior goods? a. Prices and quantities both rise. b. Prices and quantities both fall. c. Prices rise and quantities fall. d. Prices fall and quantities rise.
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
Movie tickets and film streaming services are substitutes. If the price of film streaming 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
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 he demand for movie tickets will also increase. This results in the demand curve shifting to the right.
According to ____, as the price of a good ____, the quantity supplied ____. Therefore, the supply curve slopes ____.
the law of supply; rises; rises; upward
The intersection of the supply and demand curves determines what?
the market equilibrium
On the appropriate diagram, show what happens to the market for pizza if the price of tomatoes rises
If the price of tomatoes rises, the supply curve for pizza shifts to the left because there has been an increase in the price of an input into pizza production, but there is no shift in demand
On a separate diagram, show what happens to the market for pizza if the price of hamburgers falls
If the price of burgers falls, the demand curve for pizza shifts to left because the lower price of burgers will lead consumers to buy more burgers and fewer pizza, but there is no shift in supply.
What is a market?
a group of buyers and sellers of a particular good or service
What drives markets to equilibrium?
the behavior of buyers and sellers