econ test 1

9. A demand curve shows the relationship between price and ______________ on a graph.

A. quantity demanded

14. According to the law of supply:

A. there is a direct relationship between price and the quantity supplied.

The _______________ is the quantity where quantity demanded and quantity supplied are equal at a certain price.

B. equilibrium quantity

If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as ________________.

B. excess demand

Describe and explain what could happen if a product price is set above the market equilibrium price. Does this condition in a market illustrate a price ceiling or price floor? Chapter 3

Demand would decrease supply would increase creating a surplus. price floor.

Provide three reasons that explain why the division of labor increases an economy's level of output. Chapter 1

Division of labor leads to specialization, high productivity, and economics of scale.

Define the Law of Supply and the Law of Demand. Provide a "real-world" example to explain your answer. Chapter 3

Law of supply means if the price is high more supply or if the price is low, low supply it is a direct relationship. Law of demand high price low demand and low price high demand, it is an inverse relationship. ex. when you are shopping you look for the lowest priced items

How is the market equilibrium interest rate determined in the financial markets. In addition, if there is more supply of money than demand for money, will interest rates rise or fall? Explain with a real-world example. Chapter 4

Market equilibrium interest rate is determined by the supply and demand for money. They will fall because there is a surplus for money. You can see the interest rates in banks on loans.

How would you apply the four-step process to explain what could happen to a market equilibrium price? You may use a graph/sketch to illustrate your answer. Chapter 3

1. equilibrium price (average price, initial price) 2. Identify an event (something that happened that no one expected) 3 Impact; the impact of the event on supply and demand 4. new equilibrium price (compare the prices)

List and describe three factors that will affect/influence demand, and two factors that will affect/influence supply in the products market other than the price. Chapter 3

3 demand factors income- how much money you make taste or preference- do you like the product weather- people wont buy a coat in the summer 2 supply factors weather- a storm could stop a company from shipping goods cost of inputs- all the things you buy to run a business

Interpret the following statement: "An increase in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market."

A. The statement is correct

The _________ is the only price where quantity demanded is equal to quantity supplied.

A. equilibrium price

In which of the following countries will the national government have the greatest influence with respect to the nation's economy?

B. Cuba

Any given demand or supply curve is based on the ceteris paribus assumption that _________________________.

B. all else is held equal

The term "ceteris paribus" means that:

B. all variables except those specified are constant.

In economics, the demand for a good refers to the amount of the good that people:

B. will buy at various prices.

16. ___________________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling.

C. Price floors

. Economists refer to the relationship that a higher price leads to a lower quantity demanded as the _____________________.

C. law of demand

. A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and _________________, shown on the horizontal axis.

C. quantity supplied

When economists talk about supply, they are referring to a relationship between price received for each unit sold and the ________________.

C. quantity supplied

If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that:

D. Goods X and Y are complement goods.

An increase in the income of consumers will cause

D. The demand for some goods to rise and for others to fall

What is a Price Ceiling and Price Floor? When a Price Ceiling is below market equilibrium price, what impact will it have on the supply and demand dynamics in the market? Chapter 3

Price ceiling is maximum price to pay or charge for a product by law. Price floor legal minimum price you can pay for a product. There will be more demand than supply so there will be a shortage.

The nature of demand indicates that as the price of a good increases:

buyers desire to purchase less of it.

What is Comparative Advantage? Explain how the concept enhances international trade. Chapter 2

comparative advantage- ability of a country to produce or make a product at a lower price than other countries. It enhances international trade because you export your cheap product and import other markets comparative advantage product.

In the ______________, households receive goods and services and pay firms for them.

goods and services market

Describe the dynamics in a market when the price is set above equilibrium price, and below equilibrium price. Chapter 3

price above equilibrium price will cause a surplus. Price below equilibrium price will cause a shortage.

Describe the source of supply and the source of demand in the labor market and explain how market equilibrium wage rate/salary is determined in the labor market. Chapter 4

source of demand- business, firms source of supply- employees, households, individuals Market equilibrium wage rate/salary is determined by the supply and demand for labor

. As depicted in _________________________________, it is necessary to give up some of one good to gain more of the other good

the production possibilities frontier