MacEcon Chapter 3: Demand, Supply, and Market Equilibrium
The supply curve illustrates the relationship between:
price and quantity supplied
True or False: The inverse relationship between price and quantity demanded is called the law of supply.
False
A _____ in supply while holding demand constant results in an increase in equilibrium price, but a decrease in equilibrium quantity.
a leftward shift or decrease
What refers to government financial assistance for the production of a good which lowers producers' costs and increases supply?
a subsidy
An increase in _____ while holding _____ constant results in an increase in both equilibrium _____ and _____.
demand; supply; price; quantity
A shortage results from an excess of quantity _____.
demanded
There is an _____ relationship between the price of a good or service and the quantity demanded for that good or sevice.
inverse
A demand curve shows the plotted:
inverse relationship between price and quantity demanded for a product.
Describe the law of demand
All other things being equal, as price decreases, quantity demanded increases; All other things being equal, as price increases, quantity demanded decreases.
True or False: A change in quantity demanded is cased by an increase or decrease in the price of the product under consideration and nothing else.
True
A decrease in demand while holding supply constant results in _____ in both equilibrium price and quantity.
a decline
What refers to a particular apportionment or mix of goods and services most highly valued by society?
allocative efficiency
Product demand is likely to increase due to:
an increase in the number of buyers
A _____ good is one that is used together with another good.
complementary
What type of goods affect the demand for another product due to a change in their price?
complementary and substitute goods.
An increase in supply while holding demand constant results in a(n) _____ in equilibrium price, but a(n) _____ in equilibrium quantity.
decrease, increase
Consumer expectation is a determinant of _____.
demand
The determinants of _____ for a product are factors or variables, other than the price of the product, that affect consumption or buyers' decisions to purchase and consume.
demand
The law of _____ is illustrated by a downward-sloping curve.
demand
The number of buyers is a determinant of market _____.
demand
The _____ of supply of a good are any factors other than the product's _____ that cause the supply curve of the good to shift.
determinants, price
Consumers experience _____ marginal utility the more they consume of a particular good or service.
diminishing
The inverse relationship between price and quantity demanded can be shown graphically by a _____ sloping curve.
downward
The interaction between buyers and sellers determines equilibrium price and _____.
equilibrium quantity
_____ resource prices raise production costs and, assuming a fixed product price, _____ profits.
higher; reduce
Quantity demanded is illustrated on the _____ axis, while price is illustrated on the _____ axis.
horizontal (x); vertical (y)
For most, but not all products, a rise in _____ causes an increase in demand.
income
When the price of one product rises, the demand for its substitute will _____.
increase
What would result in a change in a supply?
increase or decrease in wages, increase in the excise tax on a good, an increase in the number of certain stores at the local mall.
A favorable change in consumer tastes and preferences for a product will _____ demand, illustrated as a shift of the demand curve to the _____.
increase, right
A vast majority of goods unrelated to one another are called _____ goods.
independent
Products that have decreased demand when consumer incomes rise and increased demand when consumer incomes fall are called _____ goods.
inferior
An inverse or negative relationship between price and quantity demanded is called the:
law of demand
_____ in supply while holding demand constant results in an increase in equilibrium price, but a decrease in equilibrium quantity.
leftward shift or decrease
A price ceiling is the maximum legal price a seller may charge for a product or service where a price at or below the ceiling is _____ and a price above the price ceiling is _____.
legal; illegal
_____ benefit is the additional utility gained from consuming one more unit of a good or service.
marginal
Diminishing _____ states that, in any specific time period, buyers will derive less satisfaction from each additional unit of the product consumed.
marginal utility
Equilibrium price is also know as _____ price.
market-clearing
Define price floor
minimum price fixed by the government, generally imposed above the price, which is otherwise known as equilibrium price.
Other things equal, firms will produce and offer for sale _____ of their product at a high price than at a low price.
more
An inverse relationship between two variable is an _____ relationship.
negative
What are the determinants of demand?
number of buyers, consumer tastes, prices of related goods, changes in income, and consumer expectations.
According to the law of supply, price and quantity supplied have a _____ relationship.
positive
A change in demand occurs due to a change in a consumer's state of mind about purchasing a product that is based on something other than the _____ of the product.
price
On a supply curve, _____ is labeled on the vertical axis.
price
A government intervenes and prevents prices from rising above or falling below their equilibrium levels when _____.
prices are too high for consumers or too low for firms
What will cause a change in supply, not quantity supplied.
producer expectations, technology, and number of sellers.
The production of a good or service in the least costly way is known as _____ efficiency.
productive
In general, a firm will _____ output of a good or service if the price of the good is higher.
raise
The price of _____ used in the production process help determine the costs of production incurred by firms.
resources
When a factor other than price affects consumption of a good or service, the demand curve can shift _____ or _____.
rightward, leftward
The fundamental characteristic of demand, other things equal, is that as the price falls, the quantity demanded for a product _____.
rises
When each additional worker of a firm produces less additional output than previously added workers, then the marginal cost of additional units of output _____.
rises
The law of supply states that as price _____, the quantity supplied rises; as price _____ the quantity supplied falls.
rises; falls
A _____ the demand curve represents a change in demand while a _____ the demand curve represents a change in the quantity demanded.
shift of; movement along
Government-set prices can cause:
shortages, surpluses, negative side-effects, and distortions in resource allocation.
From an economic perspective, what is true of a market?
some markets are local some are (inter)national, in a market, buyers and sellers interact to buy and sell goods or services, and buyers and sellers make strategic decisions to make themselves better off.
What are the characteristics of a competitive market?
standardized products and a large number of buyers and sellers
The marked demand curve is the _____ of all _____ demand curves for a good or service.
summation; individual
Products whose demand varies directly with changes in money or income are called normal or _____ goods.
superior
Market _____ 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 possible price during a specific period.
supply
Producer expectations of future prices are a determinant of _____.
supply
Substitution in production is a determinant of _____.
supply
The number of sellers or competitors in a market is a determinant or shifter of the _____ curve.
supply
Equilibrium price and quantity in a market changes when there is a change in:
supply, demand, and consumer tastes.
What are the determinants of supply?
taxes and subsidies, producer expectations, prices of other goods, resource prices, technology
What determines market price and equilibrium output in a market?
the interaction of buyers and sellers