chapter 3

A market exists when

people exchange money for goods and services

Categorize each scenario as describing a movement along a demand curve or a shift of the demand curve. Shift of the demand curve

College students purchase many more energy drinks during finals week than during the rest of the semester. Students eat out more often as the federal government increases how much grant money it provides students.

Categorize each scenario as describing a movement along a demand curve or a shift of the demand curve. Movement along the demand curve

College students reduce how much detergent they use for each load of laundry in response to higher detergent prices. College students rush and buy discount furniture to take advantage of an unexpected price drop.

The figure shows the supply and demand for online music. Suppose that an economic downturn decreases household wealth and erodes consumer confidence. Move the supply and/or demand curves to reflect the primary effect this would have on the market for online music. You can assume that online music is a normal good. Also select the end result of equilibrium price and quantity.

Equilibrium price decreases. Equilibrium quantity decreases.

An economic institution that facilitates interaction between buyers and sellers is called

a market

A market will

always tends toward equilibrium

In a market economy, there is ________ relationship between the price of a good and the amount of a good that buyers are willing and able to purchase.

an inverse or negative

The basic proposition of the law of demand is that

as the price of a good increases, buyers are willing and able to purchase less.

The concept of demand is best described as

the quantity of a good or a service that people are willing and able to purchase at different possible prices.