Chapter 3

f demand increases while supply remains​ unchanged, the equilibrium price of the product will​ ________ and the equilibrium quantity will​ ______.

increase, increase

Above, equilibrium quantity and price would

increase.

Complements

Two goods are complements if both are used together for consumption or enjoyment.

Substitutes

Two goods are substitutes when either one can be used for consumption to satisfy a similar want.

Market demand

derived by summing​ (at each​ price) the individual quantites demanded by all buyers in the market. The demand of all consumers in the marketplace for a particular good or service. The summation at each price of the quantity demanded by each individual.

Law of supply of any commodity is _____ related to its price, other things being equal.

directly.

The Law supply then implies_____ the supply curve occurs due to a change in market price.

movement along

All of the following pairs of goods are complements except

observe the price of coffee decreases and the demand for tea decreases.

The law of supply states that there is a ________ relationship between the price and _______.

positive, quantity supplied.

The number of manufacturers of smartphones increases. This will cause​ a(n)

increase in supply. quantity is increase, price is decrease.

Above, equilibrium quantity and price

increase, decrease.

Demand curve

A graphical representation of the demand schedule

Subsidy

A negative tax (a payment to a producer from the government, usually in the form of a cash grant per unit.)

Demand

A schedule of how much of a good or service people will purchase at any price during a specific time period, ceteris paribus.

Supply

A schedule showing the relationship between price and quantity supplied for a specified period of time, other things ceteris peribus.

Stortage

A situation in which quantity demanded is greater than quantity supplied at a price below the market clearing price

Firms providing wireless​ (an alternative to​ cable) Internet access services reduce their prices. This will cause​ a(n)

Decrease in demand.

Ceteris paribus conditions

Determinants of the relationship between price and quantity that are unchanged along a curve. (changes in these factors cause the curve to shift)

Inferior goods

Goods for which demand falls as income rises.

Normal goods

Goods for which demand rises as income rises. Most goods are normal goods

5 factors

Income, taste and preferences, the prices of related good, expectations and market size (the number of buyers).

Law of​ demand, the quantity demanded of any commodity (good) is​ ________ related to its​ price, other things being equal.

Inversely

All of the following pairs of goods are substitutes except

Observe the price of bacon increase and the demand of eggs decreases.

Supply curve

The graphic representation of the supply schedule.

Law of supply

The observation that the higher the price of a good, the more of that good sellers will make available over a specified time period, other things ceteris peribus.

Law of demand

The observation that there is negative, or inverse, relationship between the price of any good or service and the quantity demanded, ceteris paribus.

Relative price

The price of one commodity divided by the price of another commodity (the number of units of one commodity that must be sacrificed to purchase one unit of another commodity.)

Equilibrium price (or Market clearing price)

The price that clears the market, at which quantity demanded equals quantity supplied. (the price where quantity intersects demand)

Money price

The price that we observe today, expressed in today's dollars (also called the absolute or nominal price)

Equilibrium

The situtation when quantity supplied equals quantity demanded at a particular price.

Inferior good

When consumer income​ increases, the demand for eggs decreases.

A direct

a normally relationship between price and quantity of a good supplied, other things held constant.

Which of the following will cause an outward​ (rightward) shift in​ supply?

a technology improvement

The Law of Demand

applies when other​ things, such as income and the prices of all other goods and​ services, are held constant. The observation that there is negative, or inverse, relationship between the price of any good or service and the quantity demanded, ceteris paribus.

A price ceiling is

a​ government-imposed maximum price that may be charged for a good or​ service, which can lead to shortages.

If the price of coffee rises, and as a result the demand for sugar​ falls, this implies that these two goods are

complements.

We measure the demand schedule in terms of a time dimension and in

constant quality units.

Market supply

curve is obtained by horizontally adding individual supply curves in the market.

Consumers of flash memory drives anticipate that the price of this good will decline in the future.

decrease in demand.

There are increases in the prices of storage racks and boxes used to store flash memory drives.

decrease in demand.

There is a decrease in the incomes earned by consumers of​ cable-based Internet access services. This will cause​ a(n)

decrease in demand.

Above, Equilibrium quantity would

decrease.

Equilibrium price would

decrease.

The Demand schedule

gives a schedule of alternative quantities demanded per time dimension at different possible prices.

If the price of tennis racquets​ falls, and as a result the demand for tennis balls

increase

A booming economy increases the income of the typical buyer of flash memory drives ​(this is a normal good​).

increase in demand.

Consumers' tastes shift away from using wireless Internet access in favor of​ cable-based Internet access services.

increase in demand.

There is a decrease in the price of computer drives that read the information contained on flash memory drives.

increase in demand.

There is a dramatic increase in the price of secure digital cards​ that, like flash memory​ drives, can be used to store digital data.

increase in demand.

Firms providing​ cable-based Internet access services reduce their prices. This will cause​ a(n)

increase in quantity demanded.

The market price of economics textbooks increases. This will cause​

increase in quantity supplied.

The price of touch screens used in smartphones declines

increase in supply.

The supply curve is drawn with other things held constant. If these ceteris paribus conditions of supply change, the supply curve will shift. The major ceteris paribus conditions are

input prices...technology and productivity...taxes and subsidies...expectations of future relative prices...the number of firms in the industry

When supply increases and the​ (downward-sloping) demand curve remains in the same​ position,

price falls and equilibrium quantity rises.

At the market equilibrium​ price

quantity demanded equals quantity supplied.

The law of demand says that higher prices will lead to

smaller quantity demanded and lower prices to a larger quantity demanded.

Law of supply

the market price and the quantity supplied are directly related that is they move in the same direction. Producers will offer more units at a higher price and fewer units at a lower price.

Substitutes

two goods are substitutes when a change in the price of one cause a shift in demand for the other in the same direction as the price change.