Macro Exam 2
the price of a good will tend to rise when
a temporary shortage at the current price occurs (assuming no price controls are imposed).
In a circular flow diagram, goods and services flow in a ____________
counterclockwise direction
if incomes are rising, in the market for an inferior good,
demand will fall
law of demand
the quantity of a good or service demanded varies inversely (negatively) with its price, ceteris paribus
shifts in the demand curve
A change in one of the variables, other than the price of the good itself, that affects the willingness of consumers to buy.
Shifts in Supply ("SPENT")
Changes in seller's input prices (S) Changes in the prices of related goods and services (P) Changes in expectations (E) Changes in the number of sellers (N) Changes in technology (T)
Shifts in Demand ("PYNTE"):
Changes in the Prices of Related Goods and Services (P) Changes in Income (Y) Changes in the Number of Buyers (N) Changes in Tastes (T) Changes in Expectations (E)
What determines the position and shape of a society's production possibilities curve?
The physical resources of the society, the skills of the workforce, the level of technology of the society, and the number of factories available tot he society
Economic disputes over the distribution of income are generally associated with what economic question?
Who will get the goods and services?
change in quantity demanded
a change in a good's own price leads to a change in quantity demanded, a movement along a given demand curve
The degree of government involvement in the economy is greatest in __________
a command economy
What is an example of a market
a garage sale, a restaurant, the New York Stock Exchange, an eBay auction
market supply curve
a graphical representation of the amount of goods and services that sellers are willing and able to supply at various prices
individual demand curve
a graphical representation that shows the inverse relationship between price and quantity demanded
individual supply curve
a graphical representation that shows the positive relationship between the price and quantity supplied
The private ownership of property and the use of the market system to direct and coordinate economic activity are most characteristic of __________
a market economy
competitive market
a market where the many buyers and sellers have little market power—each buyer's or seller's effect on market price is negligible
individual demand schedule
a schedule that shows the relationship between price and quantity demanded
shortage
a situation where quantity demanded exceeds quantity supplied
surplus
a situation where quantity supplied exceeds quantity demanded
Which of the following is not a question that all societies must answer? a. How can scarcity be eliminated? b. What goods and services will be produced? c. Who will get the goods and services? d. How will the goods and services be produced? e. all of the above are questions that all societies must answer
a. How can scarcity be eliminated?
What is an accurate statement about a productions possibilities curve?
an economy can produce at any point on or inside its production possibilities curve, but not outside the curve
command economy
an economy in which the government uses central planning to coordinate most economic activities
market economy
an economy that allocates goods and services through the private decisions of consumers, input suppliers, and firms
mixed economy
an economy where government and the private sector determine the allocation of resources
simple circular flow model
an illustration of the continuous flow of goods, services, inputs, and payments between firms and households
what would likely cause an increase in the demand for jelly
an increase in income, jelly is a normal good
what would not likely cause a change in the demand for cheese
an increase in the price of cheese
a point beyond the boundary of an economy's production possibilities curve is __________
both attainable and efficient
_____________, as a group, determine the demand side of the market. _____________, as a group, determine the supply side of the market.
buyers, sellers
consumer sovereignty
consumers vote with their dollars in a market economy; this accounts for what is produced
when _________ is relatively scarce, _________ methods of production will be relatively less expensive
capital/labor intensive and/or labor/capital intensive
The simple _____________ model shows the continuous flow of goods, services, inputs, and payments through the _____________ and _____________ markets among households and _____________.
circular flow, product, factor, firms
A(n) _____________ market consists of many buyers and sellers, no single one of whom can influence the market price.
competitive
Whenever the price of Good A decreases, the demand for Good B increases. Goods A and B appear to be
complements
All of the following factors will effect the supply of shoes except one. Which will not affect the supply of shoes? a. higher wages for shoe factory workers b. higher prices for leather c. a technological improvement that reduces waste of leather and other raw materials in shoe production d. an increase in consumer income
d. an increase in consumer income
_____________ requires society to use its resources to the fullest extent—getting the _____________ we can out of our scarce resources.
efficiency, most
Market economies largely rely on a(n) _____________ decision-making process, where literally millions of individual producers and consumers of goods and services determine what will be produced.
decentralized
if the demand for milk is downward sloping, than an increase in the price of milk will result in a
decreasing in the quantity of milk demanded
A supply curve illustrates a __________ relationship between _________ and __________
direct, price, quantity supplied
To generate economic growth, a society must produce _____________ consumer goods and _____________ capital goods in the present.
fewer, more
Resources tend to be specialized, so we lose some of their productivity when we transfer those resources from what they are relatively _____________ at producing to something they are relatively _____________ at producing.
good, bad
inferior good (Inverse)
if income increases, the demand for a good decreases; if income decreases, the demand for a good increases
law of supply
if income increases, the demand for a good decreases; if income decreases, the demand for a good increases
normal good (Direct)
if income increases, the demand for a good increases; if income decreases, the demand for a good decreases
What is consistent with the implications of the production possibilities curve?
if the resources in an economy are being used efficiently, more of one good can be produced only if less of another good is produced
In a market economy, the amount of goods and services one is able to obtain depends on one's _____________, which depends on the quality and quantity of the scarce _____________ he or she controls.
income, resources
If the production possibilities curve is concave from below (that is, bowed outward from the origin), it reflects _____________ opportunity costs of producing additional amounts of a good.
increasing
On a bowed production possibilities curve (concave to the origin), the opportunity costs of producing additional units of a good rises as society produces more of that good. This relationship is called the law of _____________.
increasing opportunity cost
What is a determinate of supply?
input prices, technology, expectations, the prices of related goods
Antonio's make the greatest pizzas and deliver it hot to all the dorms around campus. Last week Antonio's supplier of pepperoni informed him of a 25 percent increase in price. What variable determining the position of the supply curve has changed, and what effect does it have on supply?
input prices; supply decreases
The markets where households sell the use of their _____________ (capital, land, labor, and entrepreneurship) to _____________ are called _____________ or _____________ markets.
inputs, firms, factor, input
If an economy is operating _____________ its production possibilities curve, it is not at full capacity and is operating _____________. Such an economy's actual output is less than _____________ output.
inside, inefficiently, potential
Methods of production used where capital is relatively scarce will be _____________, and methods of production used where labor is relatively scarce will be _____________.
labor intensive, capital intensive
The _____________ -cost method is the most appropriate method for producing a given product.
least
A(n) _____________ is the process of buyers and sellers _____________ goods and services.
market, exchanging
factors (or input) markets
markets where households sell the use of their inputs (capital, land, labor, and entrepreneurship) to firms
Most countries, including the United States, have _____________ economies, in which the government and private sector determine the allocation of resources.
mixed
Market
the process of buyers and sellers exchanging goods and services
On a straight-line production possibilities curve, the _____________ are constant.
opportunity costs
The markets where households are buyers and firms are sellers of goods and services are called _____________ markets.
product
A(n) _____________ curve represents the potential total output combinations of any two goods for an economy.
production possibility
capital intensive
production that uses a large amount of capital
product markets
production that uses a large amount of capital
labor intensive
production that uses a large amount of labor
According to the law of demand, other things being equal, when the price of a good or service falls, the _____________ increases.
quantity demanded
The difference between a change in quantity demanded and a change in demand is that a change in
quantity demanded is caused by a change in a goods own price, while a change in demand is caused by a change in some other variable, such as income, tastes, or expectations
Along a supply curve
quantity supplied changes as price changes
the difference between a change in quantity supplied and a change in supply is that a change in
quantity supplied is caused by a change in a good's own price, while a change in supply is caused by a change in some other variable, such as in put prices, prices of related goods, expectations, or taxes
In the circular flow model, firms demand ____________
resources and supply products
On a production possibilities curve, we assume that the economy has a given quantity and quality of _____________ and _____________ available to use for production.
resources, technology
The production possibilities curve can be used to illustrate the economic concepts of _____________ (resource combinations outside the production possibilities curve are unattainable), _____________ (selecting among the alternative bundles avail-able along the production possibilities curve), _____________ (how much of one good you give up to get another unit of the second good as you move along the production possibilities curve), _____________ (being on the production possibilities curve rather than inside it), and _____________ (shifting the production possibilities curve outward).
scarcity, choice, opportunity cost, efficiency, economic growth
Increases in a society's output do not make _____________ disappear. Even when output has grown more rapidly than population so that people are made better off, they still face _____________.
scarcity, trade-offs
An upward sloping curve shows that
sellers are willing to increase production of their goods if they receive higher prices for them
A leftward shift in supply could be caused by
some firms leaving the industry
These statements are true about the law of increasing opportunity cost
some resources and skills cannot be easily adapted from their current uses to alternative uses the more you produce of one good, the more you are forced to employ inputs that are relatively more suitable for producing other goods resources tend to be specialized so we lose some of their productivity when we transfer those resources from producing what they are relatively good at to producing something at which they are relatively bad
A _______ production possibilities curve illustrates _______ costs of production
straight-line; constant and bowed-outward; increasing
Whenever the price of Good A increases, the demand for Good B increases as well, Goods A and B appear to be
substitutes
A market will experience a _______ in a situation where quantity supplied exceeds quantity demanded and a _________ in a situation where quantity demanded exceeds quantity supplied.
surplus, shortage
Advancements in _____________, improvements in _____________, or new _____________ could all lead to outward shifts of the production possibilities curve.
technology, labor productivity, natural resource finds
diminishing marginal utility
the concept that in a given time period, an individual will receive less satisfaction from each successive unit of a good consumed
suppose CNN announces that bad weather in Central America has greatly reduced the number of cocoa bean plants and for this reason the price of chocolate is expected to rise soon. As a result,
the current market demand for chocolate will increase
market demand curve
the horizontal summation of individual demand curves
All of the following are true statements:
the intersection of the supply and demand curves show the equilibrium price and equilibrium quantity in a market A surplus is a situation where quantity supplied exceeds quantity demanded A shortage is a situation where quantity demanded exceeds quantity supplied Shortages and surpluses set in motions actions by many buyers and sellers that will move the market toward the equilibrium price and quantity unless otherwise prevented
These statements about demand are true:
the law of demand states that when the price of a good falls (rises), the quantity demanded rises (falls), ceteris paribus. An individual demand curve is a graphical representation of the relationship between the price and the quantity demanded
The following statements about a supply curve are true:
the law of supply states that the higher (lower) the price of a good, the greater (smaller) the quantity supplied. the relationship between price and quantity supplied is positive because profit opportunities are greater at higher prices and because the higher production costs of increased output mean that supplies will require higher prices the market supply curve is a graphical representation of the amount of goods and services that suppliers are willing and able to supply at various prices
the best method of production is
the lowest cost method
increasing opportunity cost
the opportunity cost of producing additional units of a good rises as society produces more of that good
market equilibrium
the point at which the market supply and market demand curves intersect
production possibility curve
the potential total output combinations of any two goods for an economy given the available factors of production and the available production technology that firms use to turn their inputs into outputs.
equilibrium
the price at the intersection of the market supply and demand curves; at this price, the quantity demanded equals the quantity supplied
Consider a production possibilities curve for an economy producing bicycles and video game players. It is possible to increase the production of bicycles without sacrificing video game players if _____________
the production possibilities curve shifts outward due to technological progress, the production possibilities curve shifts outward due to increased immigration (which enlarges the labor force), the economy moves from a point inside the production possibilities curve to on the curve
equilibrium quantity
the quantity at the intersection of the market supply and demand curves; at the equilibrium quantity, the quantity demanded equals the quantity supplied
These statements about prices and demand curves are true:
the relationship between price and quantity demanded is inverse or negative a change in a good's prices causes a movement along in its demand curve
The circular flow model
traces the flow of goods and services among firms and households traces the flow of payments among firms and households include both product markets and factor markets
The important point about a market is what it does—it facilitates _____________.
trade
substitutes
two good are substitutes if an increase (decrease) in the price of one good causes the demand curve for another good to shift to the right (left) If the price of Good A increases (decreases), the demand for Good B Increases (decreases) Ex. Coke and Pepsi, BMW and Mercedes, muffins and bagels
complements
two goods are complements if an increase (decrease) in the price of one good shifts the demand curve for another good to the left (right) and if a decrease (increase) in the price of one good increases (decrease) the demand for another good Ex. Goods used together - tennis balls and tennis rackets, DVD's and DVD players
By putting _____________ resources to work or by putting already employed resources to _____________ uses, we could expand output.
unemployed, better
Because of scarcity, certain economic questions must be answered regardless of the level of affluence of the society or its political structure. Three funda-mental questions that inevitably must be faced in a world of scarcity are (1) _____________ will be pro-duced? (2) _____________ the goods and services be produced? (3) _____________ the goods and services produced?
what goods and services; how will ; who will get
