microeconomics ch 3 and 4
The Kreidler Kids company can produce swing sets for $1,000. Kendra wants a new swing set for her children and will pay $1,500 for it. Kendra finds the swing set she wants and pays $1,500 for it from the Kreidler Kids company. The Kreidler Kids company has
a producer surplus of $500.
a graphic representation of the relationship between price and quantity demanded of a certain good or service, with price on the vertical axis and quantity on the horizontal axis
demand curve
movement along a supply curve, resulting in a change in quantity supplied, is always caused by a shift in the
demand curve
shows the relationship between price and quantity demanded on a graph, with price per gallon on the vertical axis and quantity on the horizontal axis
demand curve
A table that shows the quantity demanded at each price, such as Table 1, is called a
demand schedule
Which country has characteristics of a command economy?
north korea
the difference between revenues and costs
profits
A rise in the price of a good or service almost always decreases the ___________ of that good or service demanded
quantity
A change in __________________ refers to a movement along the demand curve, which is caused only by a change in price
quantity demanded
The total number of units purchased at that price is called
quantity demanded
the total number of units of a good or service consumers wish to purchase at a given price
quantity demanded
A change in __________________ refers to a movement along the supply curve, which is caused only by a change in price.
quantity supplied
A supply curve is a graphical illustration of the relationship between price and
quantity supplied
the total number of units of a good or service producers are willing to supply at a given price
quantity supplied
Coffee from Colombia last year was supplied at $9 per 10 pounds. This year the demand has decreased and that same supply of Colombia coffee is priced at $6 per 10 pounds. What will happen to supply of Colombian coffee this year?
quantity supplied will decrease
Excess demand will result in suppliers ________ prices, which encourages consumers to buy ________ .
raising prices; less
So, when costs of production fall, a firm will tend to supply a larger quantity at any given price for its output. This can be shown by the supply curve shifting to the
right
happens when a change in some economic factor (other than the current price) causes a different quantity to be demanded at every price
shift in demand
means a change in the quantity supplied at every price
shift in supply
other name for excess demand
shortage
_________ surplus is greater at the equilibrium quantity and price than it will be at any other quantity and price
social
_________ surplus is larger at the equilibrium quantity and price than it would be at any other quantity
social
the sum of consumer and producer surplus at some quantity and price of output
social surplus
the sum of producer surplus and consumer surplus is called
social surplus
In a ___________ economy, there is some private property and some private control of industry
socialist
A __________ occurs when the government pays a firm directly or reduces the firm's taxes if the firm carries out certain actions
subsidy
a good or service that can be used in place of another good or service
substitute
Since the line has a positive slope, it is more likely to be a _________ curve
supply
a change in ______ refers to a shift in the entire supply curve, which is caused by shifters such as taxes, production costs, and technology
supply
input prices only shift the ______ curve
supply
the relationship between the price of a certain good or service and the quantity of that good or service producers are willing to offer for sale
supply
a change in quantity demanded, is always caused by a shift in the
supply curve
a graphic illustration of the relationship between price, shown on the vertical axis, and quantity, shown on the horizontal axis
supply curve
A drought decreases the supply of agricultural products. This means that at any given price, a lower quantity will be supplied. Conversely, especially good weather would shift the
supply curve to the right
a table that shows the quantity demanded for a certain good or service at a range of prices
supply schedule
This year three manufacturers of mattresses have closed shop and there is only one mattress manufacture left. With few additional competitors what will likely happen to the supply of mattresses?
supply will decrease and cause an increase in price
In short, __________ refers to the curve, and ____________ refers to the (specific) point on the curve
supply; quantity supplied
other name for excess supply
surplus
A product whose demand falls when income rises, and vice versa, is called an
inferior good
A change in any one of the underlying factors that determine what quantity people are willing to buy at a given price will cause a shift in
demand
When economists talk about supply, they are referring to a relationship between the price in a market and the
amount that producers collectively make available for sale.
In a market with an upward sloping supply curve and a downward sloping demand curve, when the actual price must be higher than the equilibrium price, there will be
excess supply
When the actual price in some market is above the equilibrium price, the resulting market condition is known as
excess supply
When economists talk about _________, they mean the relationship between a range of prices and the quantities demanded at those prices, as illustrated by a demand curve or a demand schedule
demand
the amount of some good or service consumers are willing and able to purchase at each price
demand
If the consumer surplus is $1000 and the producer surplus is $300, social surplus is ________.
1300
Miriam owns a small shop selling custom headbands and accessories. Last month, she sold 335 headbands for $10 each. According to the law of demand, what quantity might Miriam expect to sell if she drops the price to $6? -290 -300 -335 -415
415
the relationship between the price of a certain good or service and the quantity of that good or service someone is willing and able to buy
demand
when the amount that producers want to sell is greater than the amount that consumers want to buy
excess supply
Which of the following will shift the supply curve to the left? Government deregulation of production. An increase in the price of inputs to production. A change in consumer tastes and preferences.
An increase in the price of inputs to production.
Silicon is used for the manufacturing of semiconductor chips. At the end of last year a large new source of silicon has been discovered this year and the price of silicon has decreased by 15%. Semiconductor chips are used in devices, cell phones, gaming systems, and this year many new devices are now using chips. If you were drawing a supply and demand graph to illustrate the changes to the semiconductor market since last year, what would you say has happened to the supply and demand curves and the equilibrium price and quantity this year?
Both the demand and supply of semiconductor chips will increase shifting the curves to the right with equilibrium quantity increasing but it is impossible to pinpoint the equilibrium price change.
In short, __________ refers to the curve and ______________ refers to the (specific) point on the curve.
demand and quantity demanded
What is the second step of the four-step process for finding equilibrium
Determine whether the economic changes affect demand or supply.
A product whose demand rises when income rises, and vice versa, is called
normal good
A ruthless dictator has recently taken over the small island of Tokoli's government and is making changes to how the government and economy used to be. One of his first actions is to enforce a command economy so as to control all aspects of the country. As you watch this new dictator's changes, which of these actions would be in line with this new command economy he is creating? He deregulates government owned land and resources and allows the people to purchase them and create private businesses. He creates a new government body called the Ministry of Planning which will set wages, prices and production targets to reach each month. He opens up the economy to admit foreign companies to create business in the country and have access to the country's resources.
He creates a new government body called the Ministry of Planning which will set wages, prices and production targets to reach each month.
In 2000, the demand for audio CDs was increasing as more people purchased them to listen to during commute time. Later in the year the price of aluminium (a material used in CDs) decreased. In 2001 the iPod was launched. The new technology began shifting the market and downloading digital audio became a viable substitute for CDs. As digital technology has improved since 2001, downloading audio files continued to increase with the demand for CDs dropping. If you were drawing a supply and demand graph to illustrate the changes to the CD market between 2001 and 2011, what would you say has happened to the market and the equilibrium price and quantity of the CD market since 2001?
The demand curve shifted to the left, and the supply curve shifted to the right, the equilibrium price for CDs decreased from 2001 and it is impossible to determine the effect on the quantity.
If the demand for home gaming system games has dramatically increased in the last month, what scenario is most likely to have happened?
The holidays and new years are around the corner.
Information campaigns about tobacco hazards and taxes on tobacco are two ways to discourage its use. Which one causes a movement ALONG the demand curve, without making changes to the demand curve itself?
The tax on tobacco products that drives up its price.
There has been a recent medical study released which confirms that vitamin C can kill off viruses and in fact stops sepsis in hospital patients so they can recover faster. With this new information what do you think will happen to the Vitamin C supplement market?
There will be a shift in the demand curve as demand increases.
Cocoa nibs from Nigeria last year was supplied at $9 per 10 pounds. This year the demand has increased and that same supply of Nigerian cocoa nibs is priced at $12 per 10 pounds. What will most likely happen to supply of Nigerian cocoa nibs this year?
There will be an increase in quantity supplied.
what is the ideal type of market economy
a free and competitive market
Last year Hawaii did not received many rain storms and with eight months of little rain there was low demand for umbrellas. This year however, there have been three months of big rain storms and only a few weeks of sunny weather. If you were to draw a graph depicting the changing market for umbrellas from last year to this, how would the new equilibrium price and quantity demanded compare to last year's market?
With supply of umbrellas being constant, equilibrium price and quantity demanded increase for umbrellas compared to last year.
A price floor when it is set ________ the equilibrium price creates ________.
above; excess supply
when benefits of trade are maximized and the mix of goods being produced represents the mix that society most desires
allocative efficiency
According to the law of supply, assuming other factors are held constant as the price of bread increases, the quantity of bread supplied will decrease. as the price of bread increases, the quantity of bread supplied will increase. as the supply for bread increases, the price of bread will also increase.
as the price of bread increases, the quantity of bread supplied will increase.
After earthquakes hit the California coast and damaged tens of thousands of cars, there was a growing demand and need for automotive repair, glass replacement, dent repair and repainting. In the labor market for car repair, the demand would be represented by ________, while supply would be represented by ________.
automotive body shops and glass repair and replacement companies; automotive workers automotive body shops and glass repair and replacement companies; automotive workers
when it is possible to benefit at least one party without imposing costs on others.
inefficient
A price ceiling when it is set ________ the equilibrium price creates ________.
below; excess demand
when a price ceiling is set below the equilibrium price, resulting in a shortage
binding price ceiling
The assumption behind a demand curve or a supply curve is that no relevant economic factors, other than the product's price, are changing. Economists call this assumption
ceteris paribus
When changing one variable in a function (e.g. demand for some product), we assume everything else held constant
ceteris paribus
an economy where economic decisions are passed down from government authority and where resources are owned by the government
command economy
economic effort is devoted to goals passed down from a ruler or ruling class
command economy
In a true __________ economy, there is no private property
communist
a market in which there is a large number of buyers and sellers, so that no one can control the market price
competitive market
Other goods are _____________ for each other, meaning that the goods are often used together, because consumption of one good tends to enhance consumption of the other
complements
In order for the relationship between price and quantity demanded to shift, (known as the level of demand), what would need to take place?
consumer income increases
the gap between the price that consumers are willing to pay, based on their preferences, and the market equilibrium price
consumer surplus
A change in _________ refers to a shift in the entire demand curve, which is caused by a variety of factors
demand
Which country has characteristics of a command economy? -cuba -singapore -united states -canada
cuba
what are the only two countries to have a command economy
cuba and north korea
the loss in social surplus that occurs when a market produces an inefficient quantity
deadweight loss
As the number of people holding college degrees increases, assuming the demand for college educated labor stays constant, the wages of college educated people would
decrease as the supply of college educated labor increases.
when it is impossible to improve the situation of one party without imposing a cost on another
efficiency
On a graph, the point where the supply curve (S) and the demand curve (D) intersect is the
equilibrium
when the amount that producers want to sell exactly equals the amount that consumers want to buy
equilibrium
the only price where the desires of consumers and the desires of producers agree
equilibrium price
where the amount of the product that consumers want to buy (quantity demanded) is equal to the amount producers want to sell (quantity supplied)
equilibrium quantity
when the amount that producers want to sell is less than the amount that consumers want to buy
excess demand
A price ceiling creates ________ when it is set ________ the equilibrium price.
excess demand; below
From an initial equilibrium, suppose there's a decrease in supply. Once the market reaches its new equilibrium, there will be
fewer transactions, and they will take place at a higher price.
_________ markets are markets for saving or borrowing
financial
Price controls are an example of a market that is not
free
The owner of a paper manufacturer in Seattle, WA is planning next month's production goals. Last month the price of a ton of paper was $625, which increased to $840 this month. According to the law of supply, what would be a rational response of the owner to this change in market price for paper?
hire additional workers and increase output
four examples of free-market economies
hong kong, singapore, new zealand, and united states
What is the final step of the four-step process for analyzing changes in equilibrium?
identify the new equilibrium and compare it to the old
A price ceiling causes consumer surplus to
increase
_________ markets are markets for employees or jobs.
labor
Economists refer to the relationship that a higher price leads to a lower quantity demanded as the
law of demand
the common relationship that a higher price leads to a lower quantity demanded of a certain good or service and a lower price leads to a higher quantity demanded, while all other variables are held constant
law of demand
the inverse relationship between price and quantity demanded
law of demand
as we consume more of a good or service, the utility we get from additional units of the good or service tend to become smaller than what we received from earlier units
law of diminishing marginal utility
a higher price leads to a higher quantity supplied and a lower price leads to a lower quantity supplied
law of supply
In other words, when income increases, the demand curve shifts to the
left
Back in 2008 the app Lightsaber Unleashed was very popular for iPhone users. As the years have gone on however, few updates were made and users lost interest in the app. What effect does the change in user interest have on the demand of the Lightsaber Unleashed app market?
loss of interest will decrease demand
Price ceilings attempt to make consumer prices ________
lower
comparing the benefits and costs of choosing a little more or a little less of a good.
marginal analysis
any situation that brings together buyers and sellers of goods or services
market
an economy where economic decisions are decentralized, resources are owned by private individuals, and businesses supply goods and services based on demand
market economy
decisions about what products are available and at what prices are determined through the interaction of supply and demand
market economy
economic decision-making happens through markets
market economy
Stormie Zanzibar owns a bakery in the fictitious country of Olombia. Each month the government's market ministry mails her a large list of the regulated price of goods which include products like bread, muffins and flat bread. The list also dictates the types of goods she can sell at the bakery and what she is to charge. Because of the regulations placed on these goods, Stormie has increased her production of sweets, pies, cakes, croissants and buns and decreased her supply of breads, muffins and flat bread. She has taken these steps because the sweet goods' prices are not government controlled. Stormie Zanzibar lives under what type of economy?
mixed
The economy of Atlantia is defined by the private ownership of the means of production by Atlantia's citizens. While owners are usually free to utilize their property as they see fit, the government does intervene to ban certain harmful products (i.e. addictive drugs, lead paint, etc) from entering the market. Atlantia's parliament has recently passed a minimum wage law setting minimum hourly compensation at $5.00 per hour. Atlantia is an example of a ________ economy.
mixed market
If the government sets floor prices for wheat or corn that guarantee farmers an above-market price for that product, the most probable result would be what?
overproduction
a legal maximum price that one pays for some good or service
price ceiling
government laws to regulate prices instead of letting market forces determine prices
price control
Laws that government enacts to regulate prices are called
price controls
Requiring that all employees get a minimum wage of $8.00 is an example of a
price floor
a legal minimum price for a product
price floor
The downward slope of a demand curve illustrates the pattern that as ________ rises, ________ decreases.
price; quantity demanded
the means of production (resources and businesses) are owned and operated by private individuals or groups of private individuals
private enterprise
what are market economies based on
private enterprise
The amount that a seller is paid for a good minus the seller's actual cost is called
producer surplus
the value to producers of their sales above their cost of production
producer surplus
Countries or individuals will keep trading computers for phones until - each country acquires as many computers and phones as they can. - the additional benefit from the last traded phone will equal the additional benefit from the last computer. - the value of each additional phone and computer is equal for both countries or individuals.
the additional benefit from the last traded phone will equal the additional benefit from the last compute
The primary distinction between a free and command economy is
the degree to which the government determines what can be produced and what prices will be charged
In a command economy, resources and businesses are owned by
the government
in a demand curve, the upper most point on the demand curve corresponds to which row in Table 1
the last
When higher prices result in a lower quantity demanded, economists call this relationship
the law of demand
What a buyer pays for a unit of the specific good or service is called
the price
Advances in information technology reduced the cost of production of computers and other electronic devices. As a result,
the supply of computers and electronic devices increased and the price of these devices fell.
A competitive market is one in which
there is a large number of buyers and sellers.
When quantity demanded decreases in response to a change in price, what happens to the demand curve
there is a movement from one point to another along the demand curve
Hannah has a small business making clothing alterations. Which of the following products would dramatically affect her profit margins if the price were to decrease for that product? thread sewing machines dresses
thread
when is ceteris paribus applied
when we look at how changes in price affect demand or supply
