Ch. 3 Micro
Quantity supplied
The amount of a good or service that a firm is willing and able to supply at a given price.
Demand curve
A curve that shows the relationship between the price of a product and the quantity of the product demanded.
Supply curve
A curve that shows the relationship between the price of a product and the quantity of the product supplied.
Inferior good
A good for which the demand increases as income falls and decreases as income rises.
Normal good
A good for which the demand increases as income rises and decreases as income falls.
Competitive market equilibrium
A market equilibrium with many buyers and sellers.Complements
Complements
Goods and services that are used together.
Substitutes
Goods and services that can be used for the same purpose.
Ceteris paribus ("all else equal") condition
The requirement that when analyzing the relationship between two variables—such as price and quantity demanded—other variables must be held constant.
Law of supply
A rule that states that, holding everything else constant, increases in price cause increases in the quantity supplied, and decreases in price cause decreases in the quantity supplied.
In January, buyers of gold expect that the price of gold will rise in February. What happens in the gold market in January, holding all else constant?
The demand curve shifts to the right.
If a demand curve shifts to the right, then
demand has increased.
If the price of automobiles was to increase, then
he demand for gasoline would decrease.
If a firm expects that the price of its product will be higher in the future than it is today, then
the firm has an incentive to decrease supply now and increase supply in the future.
At a product's equilibrium price
the product's demand curve crosses the product's supply curve.
Demographics
The characteristics of a population with respect to age, race, and gender.
If an increase in income leads to a decrease in the demand for popcorn, then popcorn is
an inferior good.
Elvira decreased her consumption of bananas when the price of peanut butter increased. For Elvira, peanut butter and bananas are
complements.
In a perfectly competitive market, there are ________ buyers and ________ sellers.
many; many
If, for a product, the quantity supplied exceeds the quantity demanded, the market price will fall until
quantity demanded equals quantity supplied. The market price will then equal the equilibrium price.
The income effect of a price change refers to the impact of a change in
the price of a good on a consumer's purchasing power.
One would speak of a change in the quantity of a good supplied, rather than a change in supply, if
the price of the good changes.
Quantity demanded
The amount of a good or service that a consumer is willing and able to purchase at a given price.
Substitution effect
The change in the quantity demanded of a good that results from a change in price making the good more or less expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power.
Income effect
The change in the quantity demanded of a good that results from the effect of a change in price on consumer purchasing power, holding all other factors constant.
Market demand
The demand by all the consumers of a given good or service.
In 2004, hurricanes damaged a large portion of Florida's orange crop. As a result of this, many orange growers were not able to supply fruit to the market. If, following the hurricane, the price remained at its pre-hurricane level, we would expect to see
a shortage of oranges.
Surplus
A situation in which the quantity supplied is greater than the quantity demanded.
Perfectly competitive market
A market that meets the conditions of having (1) many buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market.
Technological change
A positive or negative change in the ability of a firm to produce a given level of output with a given quantity of inputs.
Law of demand
A rule that states that, holding everything else constant, when the price of a product falls, the quantity demanded of the product will increase, and when the price of a product rises, the quantity demanded of the product will decrease.
Market equilibrium
A situation in which quantity demanded equals quantity supplied.
Shortage
A situation in which the quantity demanded is greater than the quantity supplied.
Demand schedule
A table that shows the relationship between the price of a product and the quantity of the product demanded.
Supply schedule
A table that shows the relationship between the price of a product and the quantity of the product supplied.
What is the difference between an "increase in demand" and an "increase in quantity demanded"?
An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve.
If, in response to an increase in the price of chocolate the quantity of chocolate demanded decreases, then economists would describe this as
a decrease in quantity demanded.
A(n) ________ is represented by a leftward shift of the demand curve while a(n) ________ is represented by a movement along a given demand curve.
decrease in demand; increase in quantity demanded
In 2004, hurricanes destroyed a large portion of Florida's orange and grapefruit crops. In the market for citrus fruit in 2004
the supply curve shifted to the left resulting in an increase in the equilibrium price.
If in the market for peaches the supply curve has shifted to the left
the supply of peaches has decreased.