Econ 201 Ch.3
Given the figure on the right, if the government imposes a price ceiling of $2 per gallon on milk, the quantity of milk supplied will equal
3,000 gallons per day. correct Reason: The supply curve tells us that when the price of milk is $2 per gallon, the quantity of milk supplied is 3,000 gallons per day.
In the figure displayed, what is the equilibrium quantity?
5,000 gallons per day correct Reason: The equilibrium quantity is the quantity at which the supply curve and demand curve intersect.
Which statements describe a demand curve?
It falls from left to right on a graph of the goods and services that consumers are willing to buy at different prices at different times. It shows the relationship between price and the quantity of items demanded.
Which statements describe a demand curve?
It shows the relationship between price and the quantity of items demanded. It falls from left to right on a graph of the goods and services that consumers are willing to buy at different prices at different times.
What is the economic system that uses some combination of centralized government regulation and decentralized markets and prices?
Mixed economies
What are traits of a free-market system?
People decide which careers to pursue.
A shift in the entire demand curve is considered Blank___
a change in demand
A change in supply is represented by Blank_____
a shift in the entire supply curve
The largest dollar amount that a buyer is willing to pay for a good is the
buyer's reservation price. correct Reason: A buyer's reservation price is the largest dollar amount the buyer would be willing to pay for the good.
If the demand for bread increases when the price of peanut butter falls, then this suggests that bread and peanut butter are Blank______.
complements
Along a supply curve, if the price of butter increases, the quantity of butter supplied will Blank___
decrease incorrect Reason: As price increases, quantity supplied increases.
A maximum allowable price specified by law is a Blank_____
price ceiling
A change in demand is represented by a Blank______
shift in the entire demand curve
Total surplus is
the difference between the buyer's reservation price and the seller's reservation price.
The socially optimal quantity is:
the quantity of a good that maximizes the total economic surplus that results from producing and consuming the good.
A shift in the entire demand curve is considered Blank______.
a change in demand
A shift of the entire supply curve is considered Blank_____
a change in supply
A movement along the demand curve is considered Blank_____
a change in the quantity demanded
If hot dogs and ketchup are complements, then an increase in the price of ketchup will lead to:
a decrease in the number of hot dogs bought and sold in the market. a decrease in the price of hot dogs.
In economics, buyers and sellers who trade a particular good or service are referred to as Blank______
a market
A change in quantity demanded is represented by
a movement along the demand curve.
The market for a good consists of Blank_____
all of the buyers and sellers of that good
If butter and popcorn are complements, then a decrease in the price of butter will lead to Blank______ in the demand for popcorn.
an increase
If bread and peanut butter are complements, then a decrease in the price of peanut butter will lead to:
an increase in the amount of bread that people buy. an increase the price of bread.
Prozac and Wellbutrin are both prescription medications to treat depression. If the price of Prozac increases, then this should lead to:
an increase in the number of people who use Wellbutrin. an increase in the price of Wellbutrin.
Two goods are substitutes if
an increase in the price of one good, leads to an increase (rightward shift) in the demand for the other.
Suppose your roommate recently lost his part-time job, and you notice that afterward his consumption of Ramen Noodles increases. This suggests that for your roommate Ramen Noodles are Blank_____
an inferior good
If an increase in the price of one good, causes a decrease (leftward shift) in the demand for another good, then the two goods are Blank_____
complements
A graph showing the relationship between the quantity demanded and the price is called a Blank_____
demand curve
A buyer's reservation price is the
largest dollar amount the buyer would be willing to pay for a good. correct Reason: A buyer's reservation price is the largest dollar amount the buyer would be willing to pay for the good
If the demand for apartments decreases when house prices falls, then this suggests that apartments and houses are Blank____
substitutes
A supply curve is Blank____
a schedule or graph showing the quantity of a good that sellers wish to sell at each price
A graph showing the relationship between the quantity demanded and the price is called a Blank______.
demand curve
The numbers in the table below likely capture the daily Blank______ tennis balls.
demand for Reason: As the price of a product increases, the quantity demanded decreases, while the quantity supplied increases.
Suppose that as the price of coffee increases, consumers purchase less coffee in part because they can no longer afford to buy as much coffee as they used to. This reduction in the quantity of coffee demanded is known as the Blank______ of a price change.
income effect Reason: The income effect captures the change in the quantity demanded of a good that results because a change in the price of a good changes the buyer's purchasing power.
The change in the quantity demanded of a good that results because a change in the price of a good changes the buyer's purchasing power is known as the Blank______ of a price change
income effect correct Reason: The income effect captures the change in the quantity demanded of a good that results because a change in the price of a good changes the buyer's purchasing power.
The change in the quantity demanded of a good that results because buyers switch to or from substitutes when the price of the good changes is known as the Blank______ of a price change.
substitution effect Reason: The substitution effect captures the change in the quantity demanded of a good that results because buyers switch to or from substitutes when the price of the good changes.
Suppose that as the price of pencils increases, people buy fewer pencils and instead use pens. The resulting reduction in the quantity of pencils demanded is known as the Blank______ of a price change.
substitution effect Reason: The substitution effect captures the changes in the quantity demanded of a good that results because buyers switch into or out of substitutes as the price of the good changes.
A schedule or graph showing the quantity of a good that sellers wish to sell at each price is known as a Blank_____
supply curve
