Chapter 4 Questions for Review - Demand and Supply

Does a change in consumers' tastes lead to a movement along the demand curve or a shift in the demand curve? Does a change in price lead to a movement in the demand curve or a shift in the demand curve?

A change consumers' taste will only shift the demand curve, while a change in the price of the good itself will represent a movement along the demand curve. A curve shifts when there is a change in a relevant variable that is not measured on either axis. Because price is on the vertical axis, a change in price represents a movement along the demand curve.

What is a competitive market? Briefly describe a type of market that is not perfectly competitive.

A competitive market is one in which there are many buyers and many sellers so that each has a negligible impact on the market price. If a seller were to change their price, their buyers are likely to switch sellers. No single seller can impact the market price in a competitive market. Monopolies and oligopolies can create imperfect competitive markets. Along with this, imperfect competitive markets can be caused by only having one seller where this seller sets the price, such as a local television station.

What are the demand schedule and the demand curve, and how are they related? Why does the demand curve slope downward?

A demand schedule is a table that shows the relationship between the price of a good and the quantity demanded, while a demand curve is a graph of that same information. Because a lower price increases the quantity demanded, the demand curve slopes downward.

Beer and pizza are complements because they are often enjoyed together. When the price of beer rises, what happens to the supply, demand, quantity supplied, quantity demanded, and price in the market for pizza?

As the price of beer increases, demand for pizza decreases since people buy them together. Supply for pizza would remain unchanged, demand decreases, quantity supplied decreases, quantity demanded decreases, and then the price falls. The entire demand curve for pizza has shifted to the left and therefore affected the equilibrium price and quantity of pizza, in the send reducing the quantity of pizza supplied and demanded.

Define the equilibrium of a market. Describe the forces that move a market toward its equilibrium

Equilibrium of a market is where supply and demand have been brought into balance. At this price, the quantity of a good that buyers are willing and able to buy balances with the quantity sellers are willing and able to sell. The activity of many buyers and sellers automatically pushes the market price toward the equilibrium price. Increase in demand and shortage of supply can also move the equilibrium price, but how quickly equilibrium is reached thereafter varies from market to market.

Popeye's income declines, and as a result, he buys more spinach. Is spinach an inferior or a normal good? What happens to Popeye's demand curve for spinach?

In this case, spinach is an inferior good. A rise in quantity demanded at any given price will shift the demand curve to the right.

Describe the role of prices in market economies

Prices are great signals that guide economic decisions and bring the market into equilibrium. Prices can signal surplus or shortage and guide economists. Prices different from equilibrium can show a difference in supply and demand and can lead to a change in price until equilibrium is reached.

Does a change in producers' technology lead to a movement along the supply curve

The supply curve is very similar to the demand curve in that anything not measured on the axis (technology, input prices, expectations, number of sellers) will result in a shift in the supply curve. At the same time a change in price (on the vertical axis) will results in movement along the supply curve.

What are the supply schedule and the supply curve, and how are they related? Why does the supply curve slope upward?

The supply schedule and supply curve are a table and graph respectively that show the relationship between the price of a good and the quantity supplied. The supply curve slopes upward because a higher price means a great quantity supplied.