Chapter 7 Quiz
Complementary good
A product often used into another product
What is the difference between elastic and inelastic demand ?
Elastic is rise or fall greatly affects amount people are willing to buy inelastic has little impact on price changes
Equilibrium Price
Price at which the amount producers are willing to supply is equal to the amount consumers are willing to buy
As price goes up
quantity demanded goes down
As price goes down
quantity demanded goes up
What three factors determine the price elasticity of demand
1.) The existence of substitutes 2.) Percentage of your budget 3.) Time to adjust price
Inelastic demand
Situation in which a product's price change has little impact on the quantity demanded by consumers
Surplus
Situation in which quantity supplied greater than quantity demanded at the current price
Shortage
Situation in which the quantity demanded is greater than the quantity supplied t current price
Black market
"underground" or illegal market in which goods are traded at prices above their legal maximum prices or in which goods are sold
Price Floor
A legal maximum price below which a good or service may not be sold
Price ceiling
A legal maximum rice that may be charge for a particular good or service
What is shown on a demand schedule ?
A table of prices and quantity demand
Voluntary exchange
A transaction in which a buyer and a seller exercise their economic freedom by working out.
Marginal utility
An additional amount of satisfactions
The Law of Diminishing Returns - What is the law of diminishing returns ?
As more factors of production are added total output will increase, but at a diminished rate.
Taxes - How would an increase in government ?
Business will not be willing to supply as much curve shift to the left
What five factors can affect the demand for a specific product ?
Changes in population, changes in income, changes in tastes and preferences
What do economists call elasticity
Consumer responsiveness change in prices
Demand curve
Downward sloping line that shows in graph from the quantities demanded at each possible
What is a demand curve ?
Downward sloping line that shows, quantity demanded at each possible price
Substitution effect
Economic rule stating that if two items satisfy the same need and the price
Law of demand
Economic rule stating that the quantity demanded and price move in opposite direction
Real income effect
Economic ruler stating that individuals cannot keep buying the same quantity of a product is it prices
Price elasticity of demand
Economics concept that deals with how much demand values according to changes in price
Law of diminishing returns
Economics rule that says as more units a factor of production are added to other factors of production some point total output continue increase
Market place
Freely chosen actions between buyers and sellers of goods and services
What is a complementary product ?
Generally bought and sold together
Price of Inputs - How does the supply curve shifts if the price of inputs drops ?
If costs of inputs increase, price increase. If cost of input decreases price decreases
Technology - How does an improvement in technology affect supply ?
It will increase supply
What is the measure of how much consumers will respond to price changes ?
Price elasticity of demand
Market
Process of freely exchanging goods and services between buyers and sellers
How is the price of a product affected if production is expanded ?
Producer must charge higher prices to cover any additional price of production
What does a supply curve show ?
Quantities that producers are willing to supply at each possible price
Law of marginal utility
Rule stating that the additional satisfactions a consumer gets from purchasing one more unit a product will lessen with each additional unit purchased
How is a change in quantity demanded similar to and different from a change in demand ?
Similar : Change in quantity demand cause curve to move Different : Change and curve shift
Ealstic Demand
Situation in which a given rise or fall in a product price greatly affects the amount that people are willing to buy
What is the law of supply ?
States that as the price of a good rises, quantity supplies rise.
What is the main difference between a demand curve and a supply curve ?
Supply curve is a direct relationship while demand curve is a inverse relationship
Number of firms in the industry - if the firms enter an industry , what happens to supply ?
Supply curve will shift to the right
Demand Schedule
Table showing quantities demanded at different possible price.
Supply Schedule
Table showing quantities supplies at different possible price
Utility
The ability of any good or service to satisfy consumer wants
Quantity Demanded
The amount of a good or service that a consumer is willing and able to purchase at
Quantity supplied
The amount of a good or service that a producer is willing and able to supply at a specific price
Demand
The amount of a good service that consumers are able and willing by at various process during time period
Supply
The amount of goods or service that producers are able and willing to sell at various prices
Rationing
The distribution of goods and services based on something other than pric e
In the case of supply, what does a higher price do for a producer ?
The higher the price of a good, the greater the incentive for the producer to produce
Technology
The use of science to developed new products and new methods for producing and distributing goods
Supply Curve
Upward - sloping line that shows in graph from the quantities supplied at each possible price
Law of supply
economics rule stating hat price and quantity supplied move in the same direction