economic chapter 4
when was the OPEC formed
1960
lower production cost result in
a lower equilibrium price
movement downward along a fixed demand curve is called
an increase in quantity demanded
all trades can generate gains from trade and no trades take place that would not generate gains from trade on what part of the graph
at the market equilibrium
the equilibrium quantity is equal to
both quantity demanded and quantity supplied at the equilibrium price
in a market who do the buyers and sellers compete with
buyers compete with other buyers and sellers compete with other sellers
what can cause a change in quantity supplied
change in demand
when will a surplus occur in the market
if the price is above the equilibrium price
when markets find equilibrium, and maximize gains from trade how do buyers and sellers act
in their own self interest
A movement upward and to the left along a demand curve is called a(n)
increase in quantity supplied
the gains from trade are maximized at market equilibrium because
only the highest value buyers buy and only the lowest cost seller sell
at a price lower than equilibrium price there is a
shortage and buyers demand more than sellers are willing to sell
the equilibrium price is the only
stable price
what does the market equilibrium separates the demand curve into two parts
the buyers and the non buyers
what occurs when any quantity above the equilibrium quantity
waste
economist believe that in free markets potential gains from trade
will eventually be found by buyers and sellers in a market
what would cause a change in supply
cost
if there is no waste and all potential gains from trade have been exploited then a market must be in what
equilibrium
what would cause a change in quantity demanded
price
an increase in demand causes
temporary shortage at the old equilibrium price and a higher new equilibrium price and quantity.
what happens at any price other than the equilibrium price
forces are put into play that move the price toward the equilibrium price
what is the big diffrence between demand and quantity demanded
quantity demanded is a movement along a fixed demand curve. demand is a shift of the entire demand curve
When does a shortage occur?
quantity demanded is greater than the quantity supplied
when there is surplus in a market. What happens to a sellers incentive
reduce their prices so they can outcompete other sellers and sell more
What were OPEC countries able to work together to achieve by the early 1970s?
reduced oil supply and higher oil prices
a "change in demand" and "change in quantity demand" are
related but different concepts
the gains from trade can be defined as
the difference between a goods value and its cost
if in a market there are no unexploited gains from trade and no wasteful trades, it must be that
the equilibrium quantity is being produced
the equilibrium price is the price where
the quantity demanded is equal to the quantity supplied
what happens to trades when quantities lower than the equilibrium quantity
there are unexploited gains from trade because buyers are willing to pay more than sellers
What happened to oil prices from the early twentieth century to the 1970s?
there were modest decline in oil prices
what does a shift in the demand curve refer to
change in demand
what would cause a change in demand
change in personal income of buyers
what two parts can gains from trade be broken down too
consumer and producer surplus
at the equilibrium price for oil as an example then
high value buyers buy oil and only the low cost sellers sell oils
what does a free market maximize
the sum of producer and consumer surplus
decrease in quantity demanded is caused by a
decrease in supply
An early frost in the vineyards of Napa Valley would cause
decrease in the supply of wine which would increase price
suppose there is an increase in demand in a market and no change in the supply. what will happen to the market equilibrium price and quantituy
equilibrium price will rise and equilibrium quantity will rise
In a free market setting where quantity supplied is 50 units and quantity demanded is 40 units, price will:
fall
if demand increased then the market price will be
higher at the new equilibrium price
how did the opec crisis of 1973 effect the supply of oil
supply of oil was reduced which led to a rise in oil prices
a technological innovation in the production of golf ball what will happen to supply, price, and quantity demanded
supply will increase, price will fall and quantity demanded will increase