Microeconomics 3: Supply and Demand

What is a market?

Anyplace that buyers and sellers meet to exchange goods and services.

What is the definition of a shortage

When quantity demanded is greater than quantity supplied

The term "ceteris paribus" means that:

all variables except those specified are constant.

Demand for a good goes up. Because of this the price of the good rise.

true

The demand curve has a negative slope

true

Match the changes with the outcomes. These are concerning shifts in supply and demand. _____Price go down because of change in demand _____Price go up because of change in supply _____Price go up because of change in demand _____Price go down because of change in supply 1. Demand goes up 2. Demand goes down 3. Supply goes up 4. Supply goes down

(2)Price go down because of change in demand (4) Price go up because of change in supply (1) Price go up because of change in demand (3) Price go down because of change in supply

If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that:

Goods X and Y are complement goods.

In a market for a good, if there is a shift in supply (supply goes up). What happens to demand?

There is a movement down along the demand curve.

Match the terms with the actions ____The demand curve shifts to the left ____The demand curve shifts to the right ____There is a movement down the demand curve ____There is a movement up the demand curve 1.Demand goes down 2.Demand goes up 3.Quantity demanded goes down 4.Quantity demanded goes up

__1__The demand curve shifts to the left __2__The demand curve shifts to the right __4__There is a movement down the demand curve __3__There is a movement up the demand curve

Please list these in the order they go in ____The supply of fruit goes down ____A frost freezes fruit

__2__The supply of fruit goes down __1__A frost freezes fruit

The nature of demand indicates that as the price of a good increases:

buyers desire to purchase less of it

The ___________ is the only price where quantity demanded is equal to quantity supplied.

equilibrium price

The ____________ is the quantity where quantity demanded and quantity supplied are equal at a certain price.

equilibrium quantity

Economists refer to the relationship that a higher price leads to a lower quantity demanded as the _____________.

law of demand

A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and ____________, shown on the horizontal axis.

quantity supplied

A drought decreases the supply of agricultural products, which means that at any given price a lower quantity will be supplied; conversely, especially good weather would shift the __________________ .

supply curve to the right