Chapter 3: Supply and Demand
What are the three predictable effects of price ceilings?
-Increase the quantity demanded -Decrease the quantity supplied -Create a market shortage
Only at ________ is the quantity demanded equal to the quantity supplied.
Equilibrium
The price at which the quantity of a good demanded in a given time period equals the quantity supplied.
Equilibrium Price
The invisible hand of the market will determine_____ _____ the goods are produced for
FOR WHOM
The market's ______ _________ answer includes only those willing and able to pay the equilibrium price.
FOR WHOM
Reason: We obtain the market supply curve by "__________ adding" the supply curves of the individual producers.
HORIZONTALLY
The market mechanism determines ______ goods are produced (what resources are to use in the production process)
HOW
________ create surpluses or shortages.
Nonequilibrium
When bringing together Market Supply and Demand curves, how many combinations are compatible with both buyers and sellers?
Only one combination is compatible with the intentions of both buyers and sellers
_________ __________ are the best possible given our incomes and scarce resources.
Optimal outcomes
_________occurs in situations where we can, but choose not to, produce everything we need or desire.
Specialization
No Equilibrium Price is permanent
True
The ______question refers to the mix of output society produces (depends on market equilibrium)
WHAT
Demand and supply curves shift only when their underlying determinants change—that is, when ______ ________ is violated.
ceteris paribus
Changing the __________of _________forces the demand curve to be redrawn.
determinants of demand
a discrepancy between the quantity suppliers want to sell and the quantity consumers want to buy
disequilibrium
An ________doesn't imply that everyone is happy with the prevailing price or quantity
equilibrium
The "ceteris paribus" assumption is important to the law of demand because ______.
factors other than the price of the product affect the amount of a product purchased
As sellers' asking prices decline, the quantity demanded will increase
increase
decrease in supply is represented by a _________ shift of the supply curve; the equilibrium price rises
leftward
The amount by which the quantity demanded exceeds the quantity supplied at a given price; excess demand.
market shortage
When a ______ __________ exists, not all consumer demands can be satisfied.
market shortage
The amount by which the quantity supplied exceeds the quantity demanded at a given price; excess supply.
market surplus
Other things equal, firms will produce and offer for sale ______ of their product at a high price than at a low price.
more
An upper limit imposed on the price of a good.
price ceiling
By establishing a _____ _____, a minimum price for their services, the sellers hope to increase their incomes.
price floor
lower limit set for the price of a good
price floor
In order to satisfy consumer demands when supply is decreased, ________ ________ can occur
price gouging
The equilibrium _______and ________reflect a compromise between buyers and sellers. No other compromise yields a quantity demanded that's exactly _______ to the quantity supplied.
price; quantity; equal
increased demand is represented by a ________shift of the market demand curve; the equilibrium price rises
rightward
At prices below equilibrium, a _______shortage exists.
shortage
the equilibrium price will change whenever the _______ or ________curve shifts.
supply; demand
At above-equilibrium prices, a market ________ exists—the quantity supplied exceeds the quantity demanded
surplus
To overcome a _______ or _______, buyers and sellers will change their behavior.
surplus; shortage
Where does equilibrium occur?
the intersection of the demand and supply curves
the process of price determination is a simple process of _________
trial and error
