economics ch 4

what does it mean to say that we are running out of "cheap oil"?

that oil reserves are becoming more expensive to find and extract over time. this means the supply will eventually decrease, which will increase the price.

willingness to pay

the highest price that a buyer is willing to pay for an extra unit of a good

the lowest price that a seller is willing to receive to sell an extra unit of a good is called __________, while the highest price that a buyer is willing to pay for an extra unit of good is called _________.

willingness to accept, willingness to pay.

for a trade to take place, a buyers willingness to pay must be

higher or equal to the sellers willingness to accept

if an increase in the immigration of unskilled labor leads to a fall in the wages of wine-grape pickers, then the supply curve for sparkling wine would

increase

if honda decided go increase the price of its honds crv, then the demand for the rav4 would

increase

competitive equilibrium quantity

is the quantity that corresponds to the competitive equilibrium price

A decrease shifts to the?

left

willingness to accept is the ________ price that a seller is willing to get paid to sell an extra unit of a good. willingness to accept is the same as the _______ cost of production.

lowest, marginal.

all of the following would cause a shift in the supply curve for orange juice, except: a. new machinery that speeds up the picking process b. a freeze over all of Florida for three nights in a row c. tax credits for citrus farmers d. a new medical discovery about the benefits of citrus

d.

competitive equilibrium price

The competitive equilibrium price equates quantity supplied and quantity demanded.

holding all else equal, if the price of a digital camera rises, then we can expect

a decrease in the quantity demanded of digital cameras

price taker

a buyer or seller that takes the market price as given

market demand is derived by

fixing the price and adding up the quantities that each buyer demands

market demand is derived by;

fixing the price and adding up the quantities that each buyer demands.

a demand curve has a _____ slope due to the Law of Demand. the Law of Demand is based off a consumer's willingness to pay ______ as marginal units are consumed.

negative, less.

which change causes movement along the demand curve?

price of the good itself

the market supply curve is the _____ of all the supply curves of potential producers and would be graphed to the _______ of the individual curves.

sum, right

willingness to accept

Willingness to accept is the lowest price that a seller is willing to get paid to sell an extra unit of a good. Willingness to accept is the same as the marginal cost of production.

Input

a good or service that is used to produce another good or service

market

a group of economic agents who are trading a good or service, and the rules and arrangements for trading

demand schedule

a table that reports the quantity demanded at different prices, holding all else equal

supply schedule

a table that reports the quantity supplied at different prices, holding all else equal

if ppl began to believe that suvs were causing global warming, then the demand for the Toyota rav4 would

decrease (shift left)

normal good

for a normal good, an increase in income causes the demand curve to shift to the right (holding the goods price fixed), or in other words, causes consumers to buy more or the good

inferior good

for an inferior good, an increase in income causes the demand curve to shift to the left (holding the goods price fixed), or in other words, causes buyers to buy less of the good.

For a trade to take place, a buyer's willingness must be _________.

higher than or equal to the sellers willingness to accept

the concept of diminishing marginal benefits ------ for goods that you like a lot

hold true

If honda decided to increase the price of its Honda CRV suv, then the demand for the Toyota rav4 suv would....

increase (shift right)

if sparkling wine producers expect the price of wine to decrease in the future, then the supply curve for sparkling wine would ___.

increase (shift right)

if the number of people over the age of 16 in the country increased significantly, then the demand for the Toyota rav4 would...

increase (shift right)

aggregation

the process of adding up individual behaviors

demand curves are

downward sloping

the concept of diminishing marginal benefits means that:

each additional unit consumed is worth less to you than the previous one.

the concept of diminishing marginal benefits _________ for goods that you like a lot.

holds true

lemonade: if you go above $5, no one will buy, but if you stay below, unlimited sales.

horizontal curve.

market price

if all sellers and all buyers face the same price

negatively related

if the variables move in the opposite direction

holding all else equal

implies that everything else in the economy is held constant

the law of supply states that, in most cases, the quantity supplied of a good _______ when the price of the good rises. this means we would expect a typical supply curve to be _______.

rises, upwards sloping.

the market supply curve is the ______ of all the supply curves of potential producers and would be graphed to the _________ of the individual curves.

sum, right.

the concept of diminishing marginal benefits states that

the more you consume of a good, your willingness to pay for an additional unit declines.

perfectly competitive market

1. sellers all sell an identical good or service 2. any individual buyer or any individual seller isn't powerful enough on his or her own to affect the market price of that good or service

if the number of sellers of sparkling wine decreases significantly, then the supply curve for sparkling wine would ________.

decrease (shift left)

movement along the demand curve

if a good's own price changes and its demand curve hasn't shifted, the own price change produces a movement along the demand curve.

Law of Demand

in almost all cases, the quantity demanded rises when the price falls (holding all else equal)

Law of Supply

in almost all cases, the quantity supplied rises when the price rises (holding all else equal)

does the shape of the market curve differ from the shape of an individual demand curve?

no, they both tend to be downward sloping curves

Does the shape of the market demand curve differ from the shape of an individual demand curve?

no, they both tend to be downward sloping.

We make the assumption of holding all else equal when considering demand curves since we want to focus on the changes in the quantity demanded that result from changes in

only the price of the good.

demand curve

plots the quantity demanded at different prices

supply curve

plots the quantity supplied at different prices.

a supply curve has a ______ slope due to the lae of supply. the law of supply states that supplies _______ as price increases.

positive, increae

A supply curve has a ________ slope due to the law of supply. the law of supply states that supplies __________ as price increases.

positive, increase.

quantity supplied

the amount of a good or service that sellers are willing to sell at a given price

quantity demanded

the amount of a good that buyers are willing and able to purchase at a give price

competitive equilibrium

the crossing point of the supply curve and the demand curve

two airlines serve the route between tampa and Houston. what will happen to one airline if the other one raises its prices?

the demand curve will shift to the right

market supply curve

the market supply curve is the sum of the individual supply curves of all the potential sellers. it plots the relationship between the total quantity supplied and the market price, holding all else equal.

excess demand

when the market price is below the competitive equilibrium price, quantity demanded exceeds quantity supplied

if the government sets a minimum wage for seasonal workers, then a supply curve for sparkling wine would _______

decrease

If the government sets a minimum wage for seasonal workers, then the supply curve for sparkling wine would __________.

decrease (shift left)

if people expect the price of SUVs to decrease in the future, then the demand for the toyota rav4 would

decrease (shift left)

what is meant by holding all else equal, and how is this concept used when discussing movements along the demand curve?

all variables that can affect the demand for the good are held constant.

diminishing marginal benefit

as you consume more of a good, your willingness to pay for an additional unit declines

an aggregate demand curve is created by summing the ________________ on the individual demand _________.

quantity demanded at each price, curves.

market demand curve

the sum of all the individual demand curves in a market. it plots the relationship between total quantity demanded and the market price, holding all else equal.

demand curve shifts

The demand curve shifts when the quantity demanded changes at a given price

complements

two goods are complements when a fall in the price of one leads to a right shift in the demand curve for the other.

substitutes

two goods are substitutes when a fall in the price leads to a left shift in the demand curve for the other

positively related

two variables are positively related if the variables move in the same direction

when demand wont change based on price, the demand curve is

vertical

excess supply

when the market price is above the competitive equilibrium price, creating excess supply

suppose you have a flashlight that takes 3 batteries to power it. if you buy the batteries one at a time, for which purchase will diminishing benefits set in?

when you buy the 4th battery.