3 - Demand and Supply

change in demand

a change in buyers' plans that occurs when some influence on those plans other than the price of the good changes; illustrated by a shift of the demand curve

change in the quantity demanded

a change in buyers' plans that occurs when the price of a good changes but all other influences on buyers' plans remain unchanged; illustrated by a movement along the demand curve

change in supply

a change in sellers' plans that occurs when some influence on those plans other than the price of the good changes; illustrated by a shift of the supply curve

change in the quantity supplied

a change in sellers' plans that occurs when the price of a good changes but all other influences on sellers' plans remain unchanged; illustrated by a movement along the demand curve

demand curve

a curve that shows the relationship between the quantity demanded of a good and its price when all other influences on consumers' planned purchases remain the same

supply curve

a curve that shows the relationship between the quantity supplied of a good and its price when all other influences on producers' planned sales remain the same

inferior good

a good for which demand decreases as income increases

normal good

a good for which demand increases as income increases

substitute

a good that can be used in place of another

complement

a good that is used in conjunction with another good

competitive market

a market that has many buyers and sellers, so no single buyer or seller can influence the price

True/false: a good with a high relative price must have a low opportunity cost.

false: a good's relative price is its opportunity cost.

True/false: new technology for manufacturing computer chips shifts the demand curve for computer chips.

false: changes in technology are not a factor that shifts the demand curve; changes in technology shift the supply curve.

True/false: a decrease in income decreases the demand for all goods and services.

false: demand decreases for normal goods but increases for inferior goods.

True/false: a rise in the price of a good decreases the quantity demanded, so there can never be a situation with both the good's equilibrium price rising and its equilibrium quantity increasing.

false: the inverse relationship between the price and quantity demanded holds along a fixed demand curve, but if the demand curve shifts rightward, the equilibrium price rises and the equilibrium quantity increases.

True/false: if both the demand and supply curves shift rightward, the equilibrium price definitely rises.

false: the price rises if the shift in the demand curve is larger than that of the supply curve; but if the shifts are the same size, the price does not change and if the supply curve shift is larger, the price falls.

True/false: if the price of orange juice rises, the supply curve of orange juice shifts rightward.

false: the rise in the price of orange juice creates a movement along the supply curve to a larger quantity supplied (that is, upward and rightward), but it does not shift the supply curve.

True/false: a supply curve shows the maximum price required in order to have the last unit of output produced.

false: the supply curve shows the minimum price that suppliers must receive in order to produce the last unit supplied.

True/false: "an increase in demand" means a movement down and rightward along a demand curve.

false: the term "increase in demand" refers to a rightward shift in the demand curve.

law of supply

other things remaining the same, the higher the price of a good, the greater is the quantity supplied of it; the lower the price of a good, the smaller is the quantity supplied of it

law of demand

other things remaining the same, the higher the price of a good, the smaller is the quantity demanded of it; the lower the price of a good, the larger is the quantity demanded of it

quantity demanded

the amount of a good or service that consumers plan to buy during a given time period at a particular price

quantity supplied

the amount of a good or service that producers plan to sell during a given time period at a particular price

supply

the entire relationship between the price of a good and the quantity supplied of it when all other influences on producers' planned sales remain the same; illustrated by a supply curve

demand

the entire relationship between the price of the good and the quantity demanded of it when all other influences on buyers' plans remain the same; illustrated by a demand curve and described by a demand schedule

money price

the number of dollars that must be given up in exchange for a good or service

equilibrium price

the price at which the quantity demanded equals the quantity supplied

equilibrium quantity

the quantity bought and sold at the equilibrium price

relative price

the ratio of the price of one good or service to the price of another good or service; an opportunity cost

True/false: a good's relative price can fall even though its money price rises.

true: a good's relative price will fall if its money price rises less than the money prices of other goods.

True/false: if there is a surplus of a good, its price falls.

true: a surplus of a good results in its price falling until it reaches the equilibrium price.

True/false: if the price of chicken feed rises, the supply of chickens decreases.

true: chicken feed is a factor used to produce chickens, so a rise in its price shifts the supply curve of chickens leftward.

True/false: if a market is at its equilibrium price, unless something changes, the price will not change.

true: once at the equilibrium price, because the opposing forces of demand and supply are in balance, the situation can persist indefinitely until something changes.

True/false: if both the demand and supply curves shift rightward, the equilibrium quantity definitely increases.

true: the equilibrium quantity definitely increases when both demand and supply increase.

True/false: the law of demand states that, if nothing else changes, as the price of a good rises, the quantity demanded decreases.

true: the law of demand points out the negative relationship between a good or service's price and the quantity demanded.

True/false: if the expected future price of a good rises, its current price rises.

true: the rise in the future price shifts the demand curve rightward and the supply curve leftward, unambiguously raising the current price.