Econ Chapter 3

Suppose Alice sells a good for $60 on eBay. If the producer surplus from the sale is $25, Alice's cost of the good must have been:

$35

Low-income families consume proportionately more of which of the following kinds of goods?

Inferior goods

A surplus occurs when ..... ?

The price is above equilibrium.

Law of Supply

The principle that there is a direct relationship between the price of a good and the quantity sellers are willing to offer for sale in a defined time period, ceteris paribus.

Producer Surplus

The value of the difference between the actual selling price of a product and the price producers are willing to sell it for on the supply curve.

Consumer Surplus

The value of the difference between the price consumers are willing to pay for a product on the demand curve and the price actually paid for it.

Law of Demand

Principle that there is an inverse relationship between the price of a good and the quantity buyers are willing to purchase in a defined time period, ceteris paribus.

In moving from a shortage to equilibrium, what is true?

That the prices will/are rising.

Deadweight Loss

The net loss of consumer and producer surplus from under production or over production of a product.

Shortage

A market condition existing at any price at where the quantity supplied is less than the quantity demanded.

Surplus

A market condition existing at any price where the quantity supplied is greater than the quantity demanded.

Equilibrium

A market condition that occurs at any price and quantity at which the quantity demanded and the quantity supplied are equal.

Price System

A mechanism that uses the forces of supply and demand to create an equilibrium through rising and falling prices.

Change in quantity supplied

A movement between points along a stationary supply curve, ceteris paribus.

What would cause the demand for veggie burgers to increase?

A price increase in tofu burgers; the two are considered substitute goods.

Change in Supply

An increase or decrease in the quantity supplied at each possible price. An increase in supply is a rightward shift, and a decrease in supply is a leftward shift in the entire supply curve.

Supply Shifters

1) No. of Sellers 2) Technology 3) Resource prices 4) Taxes and Subsidies 5) Expectations 6) Prices of other goods the firm can produce.

Demand Shifters

1) No. of buyers 2) Taste and preferences 3) income 4) expectations of future changes in prices, income, and availability of goods 5) prices of related goods

Supply Curve

A curve or schedule showing the various quantities of a product sellers are willing to produce and offer for sale at possible prices during a specified period of time, ceteris paribus.

Demand Curve

A curve or schedule showing the various quantities of product consumers are willing to purchase at possible prices during a specified period of time, ceteris paribus.

Market Supply

A curve that is derived by summing horizontally individual supply curves.

With an upward-sloping supply curve, what is true?

A decrease in price results in a decrease in quantity supplied.

What causes a shortage to become larger?

A decrease in price.

Complementary Good

A good that is jointly consumed with another good. As a result, there is an inverse relationship between a price change for one good and the demand for its "go together" good.

There is news that the price of Tucker's Root Beer will increase significantly next week. If the demand for Tucker's Root Beer reacts only to this factor and shifts to the right, the position of this demand curve has reacted to a change in _____?

Expectations

Substitute Good

a good that competes with another good for consumer purchases. As a result, there is a direct relationship between a price change for one good and the demand for its "competitor good".

Change in quantity demanded

a movement between points along a stationary demand curve, ceteris paribus.

Tasha decides that when homes in her neighborhood are selling for $150,000 she will not sell her home. When average prices rise to $175,000, she decides that she will put her home on the market. This is an example of:

a positively-sloped supply curve.

Change in demand

an increase or a decrease in the quantity demanded at each possible price. An increase in demand is a rightward shift in the entire demand curve. A decrease in demand is a leftward shift in the entire demand curve.

Market

any arrangement in which buyers and sellers interact to determine the price and quantity of goods and services exchanged.

Normal good

any good for which there is a direct relationship between changes in income and its demand curve.

Inferior good

any good for which there is an inverse relationship between changes in income and its demand curve.

An increase in supply _____?

appears as a rightward shift of the supply curve.

Formula for Total surplus

consumer surplus+producer surplus

A leftward shift in the demand curve is called a ____?

decrease in demand

Law of Supply is a ______ relationship.

direct

Blu Ray Players and Blu Ray Disc

example of Complementary goods

Domestic cars and Foreign cars

example of substitute goods

A rightward shift in the demand curve is called a ___?

increase in demand

If the demand for a good decreases because consumer income has increased then the good is considered a .....?

inferior good.

A shortage occurs when ....?

price is below the equilibrium price.