Econ Ch. 3

What is the determinant of supply dealing with alternative products that can be produced by firms?

price of other goods

What is supply?

The production of a product, whereas demand refers to the buyers who consumer the product.

T&F: A substitute good is one that is used in place of another good.

True

T&F: A surplus is when quantity supplied exceeds quantity demanded.

True

T&F: Equilibrium price is the price where the intentions of buyers and sellers match.

True

T&F: Price and quantity supplied are directly related.

True

T&F: Resource costs or changes in these costs to production are responsible for shifts in the supply curve.

True

T&F: The determinants of demand, other things equal, are assumed to be constant when a demand curve is drawn or computed.

True

T&F: The number of buyers in a market is a determinant of demand.

True

T&F: The prices of factor inputs used in the production process help determine the costs of production incurred by firms.

True

Market supply

What is a schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each given possible price during a specific period?

A producer's willingness and ability to produce a specific quantity of a good or service due to a change in price is referred to as ___.

a change in quantity supplied

Why are government goods and services are not free because:

a cost is borne by society in utilizing these resources to produce any good or service; consumers and businesses pay taxes to receive the goods or services

Producer expectations of future prices are a determinant of ___.

supply

Which way does the law of demand curve slope?

downward sloping curve

What factors do businesses purchase from consumers?

entrepreneurial ability, land, capital, and labor

Which of the following would most likely lead to a decrease in demand?

A decrease in fertility rates

What results when there is a shortage?

An excess of quantity demanded

What causes a change in quantity supplied under consideration of nothing else changed?

An increase or decrease in the price of the product

What is a market?

An institution or mechanism that brings buyers and sellers into contact.

What goods are used together with other goods?

Complementary

Flow in a circular flow model is:

Counterclockwise

What is a graphical representation of the relationship between price and quantity?

Demand curve

What organizes the relationship between price and quantity in a tabular format?

Demand schedule

What curve represents the inverse relationship between price and quantity demanded?

Downward sloping curve

Due to scarce resources, every individual, whether rich or poor, is faced with an _____ when choosing to produce or consume more of one good over another.

Opportunity cost

Price and quantity supplied have a ____ relationship.

Positive

On a supply curve, what are the labels of each axis?

Price - vertical (y) Quantity - horizantal (x)

What is equal at equilibrium?

Quantity demanded and quantity supplied

Which curve is an upward sloping curve?

Supply curve

Which curve shows the seller's minimum acceptable price for each unit of the product?

Supply curve

The concept of demand can be summarized by a schedule or curve showing the quantity of a product that would be:

consumed at various possible prices

A decrease in the number of buyers in a market causes a ____ in demand.

decrease

A buyer's intentions or plans in regard to the purchase of a product is:

demand

What curve represents the amount of a product that will be purchased at various possible prices?

demand curve

The demand curve measures quantity ___ on the horizontal axis and ____ on the vertical axis.

demanded, price

The "ceteris paribus" in the relationship between price and quantity demanded are called:

determinants of demand

Changes in ___ about future price of a product may affect the producer's current willingness to ___ that product.

expectations, supply

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

If a decrease in demand is greatest than a decrease in supply, equilibrium price will ___.

fall

What decreases demand?

falling incomes and the product is a normal good, unfavorable change in consumer tastes, and a decrease in the price of a substitute good

In a circular flow model, consumers sell resources to and buy products from ____.

firms

Governments use resources to serve public needs to achieve the goal of:

increasing welfare

The market curve is the summation of all ____ demand curves for a good or service.

individual

The law of demand describes an ____ relationship between the price of a good or service and the quantity demanded of that good or service.

inverse

What is an inverse or negative relationship between price and quantity demanded?

law of demand

As firms leave an industry supply decreases, causing the supply curve to shift to the ___.

left

If costs of production rise, the producer has an incentive to produce ___ output at every possible cost.

less

If the government subsidizes the production of a good, it in effect ____ the producer's costs and ____ supply.

lowers, increases

The ____ ensures that the right amount of a particular product gets produced.

market mechanism

Buyers and sellers are brought together through:

markets

An inverse relationship between two variables is a:

negative relationship

Products whose demand varies directly with changes in money or income are called:

normal or superior goods

The products whose demand varies directly with changes in money or income are..

normal or superior goods

What will cause a change in supply rather than a change in quantity supplied?

number of sellers, technology, producer expectations

What is the only factor that causes a movement along the supply curve?

price

The interaction of buyers and sellers determines equilibrium ___ and equilibrium ___.

price, quantity

What is specialization about in an individual or firm that is using available resources to?

produce one or only a few goods and services

The function of businesses in the circular flow model is to ___ factors and ___ products.

purchase, sell

A change in ____ is caused by an increase or decrease in the price of the product under consideration and nothing else.

quantity demanded

An increase in a product will change the ____ for that product while an increase in the price of a substitute will change the ___ for the first product.

quantity demanded, demand

The fundamental characteristic of demand, other things equal, is that as the price falls, the quantity demanded for a product ___.

rises

When all other things equal, when a buyer's income rises, the willingness and ability to buy a normal product ___.

rises

The law of supply states that as price ___, the quantity supplied rises; as price ___, the quantity supplied falls.

rises, falls

A ___ the supply curve represents a change in supply while a ___ the supply curve represents a change in the quantity supplied

shift of, movement along

At equilibrium price, there is neither a ____ nor a ____ because the quantity demanded by consumers at a specific price is identical to the quantity supplied at the same time.

shortage, surplus.

An increase in ____ while holding ____ constant results in a decrease of equilibrium price, but an increase in equilibrium quantity.

supply, demand

An increase in ____ while holding the demand constant ____ equilibrium price and ____ equilibrium quantity.

supply, lowers, raises

A ___ prompts sellers to lower the price to encourage buyers by increasing the incentive to buy.

surplus

Which of the following describe the effects on equilibrium price and equilibrium quantity as a result of a simultaneous and proportional increase in supply and demand?

the change in price is indeterminate and quantity rises

What happens when consumers purchase a good or service?

the level of utility or satisfaction increases

How do improvements in productive technology enable firms to produce more units of output?

utilizing less resources

What illustrates when a good and its complement resemble a good relationship?

when the price of tuition decrease, the demand for textbooks increases; when the price of lettuce increases, the demand for salad dressing decreases

T&F: If there is a change in demand or a change in supply, it will not disturb equilibrium.

False

T&F: The market supply curve is derived by summing up the producers' individual demand curves for a good or service.

False

T&F: The sale of farm equipment takes place only in the factor market.

False

____ factor prices raise production costs and will cause supply to shift ____

Higher, left

A shift leftward in supply while demand is constant results in:

Increase in equilibrium price and a decrease in equilibrium quantity.

When producers use resources efficiently their goal is to?

Increase their profit

When the demand curve shifts upward or downward, this occurs because:

a factor other than price affects consumption of a good or service

What is the law of demand?

all other things being equal, as price increase, quantity demanded decrease; all other things being equal, as price decrease, quantity demanded increases

In markets, when prices rise and fall, what will be achieved?

equilibrium quantity and equilibrium price

A rise in income causes an ____ in demand for most products. A fall in income causes an ____ in demand for most products, other things equal.

increase, decrease

A shift in the supply curve to the right reflects an ____ in supply, while a shift to the left reflects a ____ in supply.

increase, decrease

A favorable change in consumer tastes and preferences for a product will ____ demand, shifting the demand curve to the ____.

increase, right

T&F: A change in one of the determinants of supply results in a movement along the supply curve.

False

T&F: A change in supply is represented by a movement along the curve, not a shift of the curve.

False

T&F: A complementary good is one that is used in place of another good.

False

T&F: At equilibrium quantity there is either a shortage or surplus.

False

T&F: The supply curve is an upward sloping curve because as price decreases, the producer will be willing to supply more of the product.

False

A surge in demand while holding supply constant results in an ___ in both equilibrium price and quantity.

increase

When the price of one product rises, the demand for its substitute will:

rise

Which type of goods affect the demand for a product due to a change in their price?

substitute and complementary goods

A consumer's willingness to purchase in a market must be supported by the ability to make the purchase as evidenced by:

the necessary income

Substitute goods and complementary goods refer to which determinant of demand?

the price of related goods

A decrease in demand while holding supply constant results in:

a decrease in both equilibrium price and quantity

Who is involved in a circular flow model?

consumers, businesses, government, and global actors

In a circular flow model, the market economy creates:

continuous, repetitive flows of goods and services and factors

If the increase in demand is greater than the decrease in supply, the equilibrium quantity will ___.

rise