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Demand in Competitive Markets
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Demand in Competitive Markets

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All competitive markets involve which of the following? (Select all that apply)

  • Demand (correct)
  • Quantity (correct)
  • Price (correct)
  • Supply (correct)

    • The concept of demand can be summarized by a schedule or curve showing the quantity of a product that would be _____

    consumed at various possible prices

    A buyer's intentions or plans in regard to the purchase of a product is known as _____

    demand

    The inverse, or negative, relationship between price and quantity demanded is known as the law of ____

    <p>demand</p> Signup and view all the answers

    The 'other-things-equal' assumption is important in the law of demand because _____

    <p>factors in addition to price affect the amount of a product purchased</p> Signup and view all the answers

    Which of the following are the characteristics of a competitive market? (Select all that apply)

    <p>Standardized products</p> Signup and view all the answers

    The _____ is consistent with common sense because people ordinarily do buy more of a product at a lower price.

    <p>law of demand</p> Signup and view all the answers

    Which of the following specifically refers to demand?

    <p>the buyer side of any market</p> Signup and view all the answers

    Consumers will only buy additional units of a good if the price of the good is reduced is an example of _____

    <p>diminishing marginal utility</p> Signup and view all the answers

    The price actually paid for a good is not reflected in the demand because demand is merely a statement of _____ buying the good.

    <p>buyers' intention regarding the</p> Signup and view all the answers

    Consumers experience _____ marginal utility the more they consume of a particular good or service.

    <p>diminishing</p> Signup and view all the answers

    Which statement correctly describes the relationship between price and quantity demanded of a good or service?

    <p>Holding all else constant, as price increases, quantity demanded decreases and as price decreases, quantity demanded increases</p> Signup and view all the answers

    The income effect indicates that a _____ price increases the purchasing power of income, enabling consumers to purchase ____ of a product and vice versa.

    <p>lower; more</p> Signup and view all the answers

    During the second quarter, the price of Jonah's burgers remains constant, but the price of Sam's burgers increases. Other things _____, the law of demand indicates that fewer Sam's burgers will be purchased than in the previous quarter.

    <p>equal</p> Signup and view all the answers

    Due to the substitution effect, buyers have an incentive to buy less expensive products in place of similar products that have become _____.

    <p>relatively more expensive</p> Signup and view all the answers

    The law of demand is consistent with common sense because people ordinarily _____.

    <p>buy more at a low price</p> Signup and view all the answers

    The inverse relationship between price and quantity demanded can be graphically illustrated by ____.

    <p>a downward sloping curve</p> Signup and view all the answers

    Diminishing marginal utility states that less satisfaction is derived from each successive unit yields _____, consumers will buy additional units only if the price of those units is progressively _____.

    <p>less and less utility; reduced</p> Signup and view all the answers

    Which of the following are determinants of demand? (Select all that apply)

    <p>Number of buyers</p> Signup and view all the answers

    Diminishing marginal _____ states that, in any specific time period, buyers will derive less satisfaction from each additional unit of the product consumed.

    <p>utility</p> Signup and view all the answers

    A favorable change in consumer tastes and preferences for a product will ____ demand, shifting the demand curve to the _____.

    <p>increase; right</p> Signup and view all the answers

    The law of demand can be supported by the income effect.

    <p>True</p> Signup and view all the answers

    Which are the reasons for changes in buyer tastes? (Select all that apply)

    <p>The introduction of products</p> Signup and view all the answers

    The _____ suggests that at lower prices, buyers have an incentive to substitute less expensive products for similar products that are now relatively more expensive.

    <p>substitution effect</p> Signup and view all the answers

    A demand curve shows the ____.

    <p>inverse relationship between price and quantity demanded for a product</p> Signup and view all the answers

    If the birthrate increases, the purchase of baby products is likely to ____.

    <p>increase</p> Signup and view all the answers

    Which of the following is likely to cause an increase in the demand for a good or service?

    <p>An increase in the number of buyers</p> Signup and view all the answers

    An unfavorable change in consumer tastes and preferences for a product will ____ demand, which is illustrated as a shift of the demand curve to the ____.

    <p>decrease; left</p> Signup and view all the answers

    Which of the following exemplifies a decrease in the demand for goods due to a decrease in the number of buyers? (Select all that apply)

    <p>People leaving the small towns where they grew up to look for job opportunities</p> Signup and view all the answers

    Which of the following exemplifies a change in buyers' tastes?

    <p>An increase in demand for digital cameras over 35mm cameras</p> Signup and view all the answers

    A change in the number of buyers is a determinant of market ____.

    <p>demand</p> Signup and view all the answers

    When a product’s demand varies directly with money income, it is considered a(n) ____ good.

    <p>superior</p> Signup and view all the answers

    In which of the following cases would the demand for a normal good likely increase? (Select all that apply)

    <p>A decrease in the price of complementary goods</p> Signup and view all the answers

    Which of the following affects the demand for normal goods and inferior goods?

    <p>Consumer income</p> Signup and view all the answers

    An increase in consumer income is likely to increase the demand for a normal good.

    <p>True</p> Signup and view all the answers

    Which of the following types of goods affect the demand for another product due to a change in their price? (Select all that apply)

    <p>Substitute goods</p> Signup and view all the answers

    When the price of one product rises, the demand for its substitute will increase.

    <p>True</p> Signup and view all the answers

    What are two goods called when a change in the price of one good has little or no effect on the demand for the other?

    <p>independent goods</p> Signup and view all the answers

    Which of the following factors increase the demand for any good or service? (Select all that apply)

    <p>An increase in the price of a substitute good</p> Signup and view all the answers

    A ___ the demand curve represents a change in demand while a ____ the demand curve represents a change in the quantity demanded.

    <p>shift of; movement along</p> Signup and view all the answers

    The law of supply states that as price ____, the quantity supplied (Qs) rises; as price _____, the quantity supplied falls.

    <p>rises; falls</p> Signup and view all the answers

    Other things equal, the fundamental characteristic of supply is _____.

    <p>as price falls, the quantity supplied falls</p> Signup and view all the answers

    Market _____ is a schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each possible price during a specific period.

    <p>supply</p> Signup and view all the answers

    According to the law of supply, price and quantity supplied have a(n) _____ relationship.

    <p>direct</p> Signup and view all the answers

    Other things equal, firms will produce and offer for sale ____ of their product at a high price than at a low price.

    <p>more</p> Signup and view all the answers

    Which of the following has the greatest effect on the quantity supplied?

    <p>price</p> Signup and view all the answers

    In general, a firm will _____ the output of a good or service if the price of the good is rising.

    <p>increase</p> Signup and view all the answers

    The supply curve is ____ sloping curve.

    <p>an upward</p> Signup and view all the answers

    When drawing a supply curve, ____ is labeled on the vertical axis.

    <p>price</p> Signup and view all the answers

    Which of the following are determinants of supply? (Select all that apply)

    <p>Resource prices</p> Signup and view all the answers

    Which of the following is the most important factor for a producer in determining how much of a product to produce?

    <p>Price</p> Signup and view all the answers

    A change in one of the determinants of supply results in a movement along the supply curve.

    <p>False</p> Signup and view all the answers

    The supply curve illustrates the relationship between _____

    <p>price and quantity supplied</p> Signup and view all the answers

    The supply curve measures quantity _____ on the horizontal axis and ____ on the vertical axis.

    <p>supplied; price</p> Signup and view all the answers

    The determinants of the supply of a good are any factors other than the product's _____ that cause the supply curve of the good to shift.

    <p>price</p> Signup and view all the answers

    ___ resource prices raise production costs and, assuming a fixed product price, _____ profits.

    <p>Higher; reduce</p> Signup and view all the answers

    The prices of the ____ used in the production process help determine the costs of production incurred by firms.

    <p>resources</p> Signup and view all the answers

    How do improvements in productive technology enable firms to produce more units of output?

    <p>By utilizing fewer resources, thereby lowering costs</p> Signup and view all the answers

    Greater resource prices ____ the costs of production, thereby, ____ the incentive for firms to produce the good at each price.

    <p>increase; reducing</p> Signup and view all the answers

    The _____ incurred by firms when producing a good or service arise from the prices of the inputs that are used to produce said good or service.

    <p>costs of production</p> Signup and view all the answers

    Resource costs or changes in these costs to production are responsible for shifts in the supply curve.

    <p>True</p> Signup and view all the answers

    If the government subsidizes the production of a good, it in effect ____ the producers' costs and ____ supply.

    <p>lowers; increases</p> Signup and view all the answers

    In general, what goals does the improvement of production techniques help companies to achieve?

    <p>Lower production costs, increase supply, use fewer resources per unit of output</p> Signup and view all the answers

    If the government of a country subsidizes the production of a good, it: (Select all that apply)

    <p>Increases supply</p> Signup and view all the answers

    An increase in business taxes causes a(n) ____ in supply and will ____ production costs.

    <p>decrease; increase</p> Signup and view all the answers

    Government subsidies of the production of a good has the effect of ____.

    <p>increasing supply</p> Signup and view all the answers

    Which of the following refers to government financial assistance for the production of a good which lowers producers' costs and increases supply?

    <p>a subsidy</p> Signup and view all the answers

    The determinant of supply dealing with alternative products that can be produced by firms is called ___.

    <p>price of substitutes in production</p> Signup and view all the answers

    Producer expectations refer to firms' expectations of ___ for a good or service that they produce.

    <p>future prices</p> Signup and view all the answers

    If producers expect lower prices for their goods or services in the future, they will ____ now, which is illustrated by a shift of the supply curve to the ____.

    <p>increase their supply; right</p> Signup and view all the answers

    Which of the following would result in a change in supply? (Select all that apply)

    <p>An increase in the number of shoe stores at the local mall</p> Signup and view all the answers

    The number of sellers or competitors in a market is a determinant or shifter of the ___ curve.

    <p>supply</p> Signup and view all the answers

    As firms leave an industry, supply decreases. This is illustrated as a shift of the supply curve to the ____.

    <p>left</p> Signup and view all the answers

    Which of the following will cause a change in supply and not quantity supplied? (Select all that apply)

    <p>Number of sellers</p> Signup and view all the answers

    Other things equal, which of the following is correct regarding increasing the number of sellers in an industry?

    <p>True</p> Signup and view all the answers

    A _____ the supply curve represents a change in supply while a ___ the supply curve represents a change in the quantity supplied.

    <p>shift of; movement along</p> Signup and view all the answers

    The only factor that causes a movement along the supply curve is:

    <p>price</p> Signup and view all the answers

    What determines market price and equilibrium output in a market?

    <p>the interaction of buyers and sellers</p> Signup and view all the answers

    A change in _____, rather than a change in the quantity supplied, means a change in the schedule or a shift of the supply curve.

    <p>supply</p> Signup and view all the answers

    A change in ____ causes a movement along the supply curve.

    <p>product price</p> Signup and view all the answers

    The equilibrium price where the quantity demanded equals the quantity supplied is otherwise known as the ____-clearing price.

    <p>market</p> Signup and view all the answers

    The interaction between buyers and sellers determines the equilibrium price and the ____ quantity.

    <p>equilibrium</p> Signup and view all the answers

    The ____ output is the quantity at which quantity demanded equals quantity supplied in a competitive market.

    <p>equilibrium</p> Signup and view all the answers

    What is the price where the intentions of buyers and sellers match?

    <p>the equilibrium price</p> Signup and view all the answers

    The interaction between buyers and sellers, which determines the equilibrium ___ and ___, is illustrated by the intersection of the demand and supply curves.

    <p>price; quantity</p> Signup and view all the answers

    A surplus is also known as excess ____.

    <p>supply</p> Signup and view all the answers

    A change in ___, rather than a change in quantity supplied, means a change in the schedule or a shift of the supply curve.

    <p>supply</p> Signup and view all the answers

    Equilibrium price in a market changes when there is a change in which of the following? (Select all that apply)

    <p>Demand</p> Signup and view all the answers

    A surplus is when quantity supplied exceeds quantity demanded.

    <p>True</p> Signup and view all the answers

    A shortage results from an excess of quantity ___.

    <p>demanded</p> Signup and view all the answers

    The rationing function of prices refers to the ability of the competitive forces of supply and demand to establish a price at which ____.

    <p>buying and selling decisions are consistent</p> Signup and view all the answers

    A change in ____ causes the supply curve of a product to shift leftward or rightward.

    <p>resource prices</p> Signup and view all the answers

    The production of a good or service in the least costly way is known as ___ efficiency.

    <p>productive</p> Signup and view all the answers

    What does allocative efficiency refer to?

    <p>the particular mix of goods most highly valued by society</p> Signup and view all the answers

    ____ benefit is the additional utility gained from consuming one more unit of a good or service.

    <p>Marginal</p> Signup and view all the answers

    The ____ of a good or service by a producer essentially reflects the marginal cost of producing the good or service.

    <p>supply</p> Signup and view all the answers

    Competition among corn producers forces them to use the best technology and right mix of productive resources; otherwise their costs will be too high relative to the market price and they will be unprofitable. This is best described as ____.

    <p>productive efficiency</p> Signup and view all the answers

    The demand by a consumer for a good or service essentially reflects the ___ of the good or service, based on the utility received.

    <p>marginal benefit</p> Signup and view all the answers

    A decrease in demand while holding supply constant results in ____.

    <p>a decrease in both equilibrium price and quantity</p> Signup and view all the answers

    Which of the following refers to a particular apportionment or mix of goods and services most highly valued by society?

    <p>Allocative efficiency</p> Signup and view all the answers

    Study Notes

    Demand in Competitive Markets

    • Competitive markets involve supply, demand, price, and quantity.
    • Demand is represented by schedules or curves indicating quantities consumers are willing to buy at different prices.
    • The law of demand illustrates the negative correlation between price and quantity demanded.

    Characteristics of Demand

    • Demand refers to consumers’ intentions to purchase products.
    • Factors influencing demand include consumer income, number of buyers, prices of related goods, expectations, and tastes.
    • Diminishing marginal utility explains that additional units of a good provide less satisfaction, influencing purchasing behavior based on price reductions.

    Laws and Effects in Demand

    • The "other-things-equal" assumption highlights that price isn't the sole factor in demand.
    • The income effect demonstrates that lower prices increase purchasing power, thereby increasing demand.
    • The substitution effect prompts consumers to replace expensive goods with cheaper alternatives.

    Shifts in Demand

    • A rightward shift indicates an increase in demand, while a leftward shift denotes a decrease.
    • Changes in consumer tastes, number of buyers, and income levels can lead to shifts in the demand curve.

    Supply in Competitive Markets

    • Supply curves illustrate the positive relationship between price and quantity supplied; as prices rise, quantity supplied increases.
    • Determinants of supply include technology, resource prices, taxes, subsidies, and the number of sellers in a market.

    Laws and Effects in Supply

    • Price is the most influential factor on quantity supplied.
    • An increase in taxes typically reduces supply, while government subsidies increase supply by lowering production costs.

    Market Equilibrium

    • Market equilibrium occurs at the price where quantity demanded equals quantity supplied.
    • Surpluses arise when quantity supplied exceeds quantity demanded; shortages occur when quantity demanded surpasses quantity supplied.

    Efficiency in Production

    • Productive efficiency refers to producing goods at the lowest possible cost.
    • Allocative efficiency denotes the optimal mix of goods valued by society, ensuring resources are allocated where they are most effective.

    Responses to Changes

    • An increase in demand with constant supply raises equilibrium prices and quantities, while a decrease in demand results in lower prices and quantities.
    • Expectations about future prices can influence current supply levels, as producers adjust based on anticipated market conditions.

    Key Economic Concepts

    • The marginal benefit reflects the additional satisfaction from consuming one more unit, guiding consumer choices.
    • Price adjustments encourage firms to adopt efficient practices to remain profitable amid competitive pressures.

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    Description

    This quiz explores the fundamentals of demand within competitive markets. It covers key concepts including demand curves, the law of demand, and factors influencing consumer purchasing behavior. Test your understanding of how price affects demand and the implications of diminishing marginal utility.

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