Eco. 2302 Ch. 3 test 1

The key signals that send messages to buyers and sellers to buy or not to buy or to sell or not to sell are, all other things unchanged:

prices.

(Exhibit: The Demand for music downloads) A decrease in the price of CDs (a substitute) would result in a change illustrated by:

the move from f to g in Figure (a)

(Exhibit: The Demand for music downloads) A decrease in the price of iPods and other similar devices would result in a change illustrated by:

the move from h to i in Figure (b).

(Exhibit: The Demand for music downloads) A decrease in the fee charged for music downloads would result in a change illustrated by:

the move from j to k in Figure (c)

The slope and location of the demand curve depend on:

the number of buyers.

How a supply curve is sloped and located is affected by:

resource prices.

A supply curve that is upward sloping means that:

suppliers will want to sell more at higher prices.

A curve that shows the relationship between the price and quantity supplied during a particular period, all other things unchanged, is the:

supply curve.

In the textbook, the prices of the factors of production, returns from alternative activities, technology, seller expectations regarding future prices, and the number of sellers are called:

supply shifters.

When economists study the behavior of sellers, they are studying:

supply.

(Exhibit: Demand and Supply of Gasoline) Given the equilibrium after a change in supply from S1 to S2:

At the old price of $2.50, there will be pressure for the price to fall.

(Exhibit: Demand and Supply of Gasoline) What might cause the supply curve to shift from S2 back to the initial supply curve S1?

The Organization of Petroleum Exporting Countries (OPEC) restricts the production of crude oil.

(Exhibit: Demand and Supply of Gasoline) When the supply curve shifted from the initial equilibrium to the new intersection of supply and demand at a price of ________ and quantity of 400, this could have resulted from ________.

$1.50; an improvement in refining technology

(Exhibit: Demand and Supply of Gasoline) The initial price and quantity (at intersection of S1 and D) in equilibrium are:

$2.50 and 300 gallons.

(Exhibit: Demand and Supply of Gasoline) Given the initial equilibrium of S1 and D, any price lower than _____________ will create pressure for the price to ________.

$2.50; rise

If a demand curve shifts to the left, then:

a lower equilibrium price and quantity would result.

(Exhibit: Demand and Supply of Gasoline) A factor that may have changed supply from S1 to S2 is:

better technology in the production of gasoline

A negative relationship between the quantity demanded and price is called the law of ______.

demand

The principle stating that, for virtually all goods and services, there is a negative relationship between price and quantity demanded, all other things unchanged, is the law of:

demand.

The relationship between the price of a good and the quantity people are willing and able to purchase is:

demand.