ECon 3

A movement along the demand curve is considered ______.

a change in the quantity demanded

If butter and popcorn are complements, then an increase in the price of butter will lead to _____ in the demand for popcorn.

decrease

If people who currently own homes learn that home prices are likely to go up in their area next year, then this should lead to ____ in the current supply of homes.

decrease

f butter and popcorn are complements, then an increase in the price of butter will lead to _____ in the demand for popcorn.

decrease

f torrential rains wipe out this year's corn crop, this should lead to _____ in the supply of corn.

decrease

A medical breakthrough that decreases the cost of treating cancer should lead to ____ in the supply of cancer treatments.

increase

When a new technology reduces the cost of production, supply ______.

will shift to the right (increase)

Which of the following factors will lead to an increase in the demand for a good?

A decrease in the price of a complement An expectation of higher prices in the future

income e ffect

The income effect captures the change in the quantity demanded of a good that results because a change in the price of a good changes the buyer's purchasing power.

If the price of cheese increases, then this should lead to _____ in the supply of pizza

a decrease Reason: An increase in the price of an input will lead to a decrease in supply.

A change in quantity demanded is represented by

a movement along the demand curve.

If the demand for wine increases as people's incomes go up, then wine is _____.

a normal good

A supply curve is _

a schedule or graph showing the quantity of a good that sellers wish to sell at each price

people who currently own homes learn that home prices are likely to go up in their area next year, then this should lead to ____ in the current supply of homes.

an increase Reason: If people believe that home prices are going to go up next year, this may lead them to delay selling their homes for a year, thereby decreasing current supply.

Two goods are complements if

an increase in the price of one good, leads to a decrease (leftward shift) in the demand for the other.

Two goods are substitutes if

an increase in the price of one good, leads to an increase (rightward shift) in the demand for the other.

If an increase in the price of one good, causes a decrease (leftward shift) in the demand for another good, then the two goods are ____

compliments

An increase in the supply of corn (a rightward shift in the supply curve) could be the result of _____ in the price of an input to the production of corn.

decrease

If bagels and cereal are substitutes, then a decrease in the price of bagels will lead to _____ in the demand for cereal.

decrease

If the price of butter increases, the quantity of butter demanded will ______.

decrease

Seller's surplus is

he difference between the price the seller receives and the seller's reservation price.

Suppose that as the price of coffee increases, consumers purchase less coffee in part because they can no longer afford to buy as much coffee as they used to. This reduction in the quantity of coffee demanded is known as the _____ of a price change.

income effect

uppose that as the price of movie tickets increases, people stop going to the movies as often because they can no longer afford to do so. This reduction in the quantity of movie tickets demanded is known as the _____ of a price change.

income effect

If Netflix and Hulu Plus are substitutes, then an increase in the price of Netflix will lead to _____ in the demand for Hulu Plus.

increase

If the price of sugar falls, this is like to lead to _____ in the supply of candy.

increase

butter and popcorn are complements, then a decrease in the price of butter will lead to _____ in the demand for popcorn.

increase

The change in the quantity demanded of a good that results because buyers switch to or from substitutes when the price of the good changes is known as the _____ of a price change.

substitution effect Reason: The substitution effect captures the change in the quantity demanded of a good that results because buyers switch to or from substitutes when the price of the good changes.

A schedule or graph showing the quantity of a good that sellers wish to sell at each price is known as a _____.

supply curve

Buyer's surplus is

the difference between a buyer's reservation price and the price the buyer actually pays.

buyers surplus

the difference between a buyer's reservation price and the price the buyer actually pays.

Total surplus is

the difference between the buyer's reservation price and the seller's reservation price.

Seller's surplus is

the difference between the price the seller receives and the seller's reservation price.

An increase in the price of cotton is likely to shift the supply curve for clothing (that uses cotton as an input) to

the left. Reason: An increase in the price of an input will lead to a decrease in supply (a leftward shift).

he socially optimal quantity is

the quantity of a good that maximizes the total economic surplus that results from producing and consuming the good.

True or false: The socially optimal quantity is that level for which the marginal cost and marginal benefit of the good are the sam

true

uppose your roommate recently lost his part-time job, and you notice that afterward his consumption of Ramen Noodles increases. This suggests that for your roommate Ramen Noodles are _____.

inferior good

If an increase in the price of one good, causes a increase (rightward shift) in the demand for another good, then the two goods are _____.

susitutes

Which of the following factors will lead to a decrease in demand?

A decrease in the price of a substitute. A decrease in the population of potential buyers.

A maximum allowable price specified by law is a _______.

price ceiling

If the demand for tea increases when the price of coffee goes up, then this suggests that coffee and tea are ____

susitutes

Suppose that as the price of movie tickets increases, people go to the movies less often and instead rent movies at home. The resulting reduction in the quantity of movies demanded is known as the _____ of a price change.

susitutuion effect