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Questions and Answers
If a decrease in the price of one good causes a decrease in the demand for another, the two goods are called ______________ goods.
If a decrease in the price of one good causes a decrease in the demand for another, the two goods are called ______________ goods.
substitute
What is the supply curve?
What is the supply curve?
upward-sloping
When there is a shortage of a good, what will happen to the price of the good?
When there is a shortage of a good, what will happen to the price of the good?
rise
The _____________ consumers there are who would be likely to purchase a given product, the lower its market demand will be, and the demand curve will shift _________________.
The _____________ consumers there are who would be likely to purchase a given product, the lower its market demand will be, and the demand curve will shift _________________.
A shortage is represented by the distance:
A shortage is represented by the distance:
In the context of Shannon's pay raise, sushi is what type of good?
In the context of Shannon's pay raise, sushi is what type of good?
Why do strawberry breakfast bars sell at a higher rate when a hurricane is predicted?
Why do strawberry breakfast bars sell at a higher rate when a hurricane is predicted?
How might an increase in the price of celery affect the supply of radishes?
How might an increase in the price of celery affect the supply of radishes?
The price at which the quantity demanded is equal to the quantity supplied is known as the ______________ price.
The price at which the quantity demanded is equal to the quantity supplied is known as the ______________ price.
According to the law of demand, what will happen to the quantity demanded for tomatoes when prices increase due to crop loss?
According to the law of demand, what will happen to the quantity demanded for tomatoes when prices increase due to crop loss?
Fewer sellers of a product would cause the supply curve for that product to shift:
Fewer sellers of a product would cause the supply curve for that product to shift:
What happens when the local food store lowers the price of hot dogs?
What happens when the local food store lowers the price of hot dogs?
What effect does an expectation of future decreases in the price of stocks have on the supply curve in the current period?
What effect does an expectation of future decreases in the price of stocks have on the supply curve in the current period?
How would an increase in the price of oil illustrate effects on the supply and demand graph of dependent products?
How would an increase in the price of oil illustrate effects on the supply and demand graph of dependent products?
A (n) _____________ is represented by the horizontal distance between the supply and demand curves when price is below equilibrium.
A (n) _____________ is represented by the horizontal distance between the supply and demand curves when price is below equilibrium.
Provide an example of an inferior good.
Provide an example of an inferior good.
The two goods are ____________________ goods when the price of one good rises, leading to a fall in demand for the other.
The two goods are ____________________ goods when the price of one good rises, leading to a fall in demand for the other.
If the demand and supply of a good both decrease but demand decreases by more than supply, what will happen to the new equilibrium price?
If the demand and supply of a good both decrease but demand decreases by more than supply, what will happen to the new equilibrium price?
What is referred to as a demand schedule?
What is referred to as a demand schedule?
What happens to the equilibrium price when the supply of skateboards increases and demand stays the same?
What happens to the equilibrium price when the supply of skateboards increases and demand stays the same?
If the supply curve is vertical, what happens when demand increases?
If the supply curve is vertical, what happens when demand increases?
When does the market equilibrium price exist?
When does the market equilibrium price exist?
What occurs when a change in tastes decreases people's desire for a good?
What occurs when a change in tastes decreases people's desire for a good?
What is an economic institution that facilitates interaction between buyers and sellers called?
What is an economic institution that facilitates interaction between buyers and sellers called?
What defines a market?
What defines a market?
A market will always tend toward equilibrium.
A market will always tend toward equilibrium.
Frank takes care of his elderly aunt while she recovers from surgery is an example of a market.
Frank takes care of his elderly aunt while she recovers from surgery is an example of a market.
Jack and Diane buy tickets to a sold-out pirates game from a ticket scalper is an example of a market.
Jack and Diane buy tickets to a sold-out pirates game from a ticket scalper is an example of a market.
Jess gets a soda from the vending machine on her afternoon break is an example of a market.
Jess gets a soda from the vending machine on her afternoon break is an example of a market.
The citizens of Marble Cliff, Vermont, getting financial relief from the government after a flood is an example of a market.
The citizens of Marble Cliff, Vermont, getting financial relief from the government after a flood is an example of a market.
Suzanne gets a used textbook on eBay for much less than the price at her university's bookstore is an example of a market.
Suzanne gets a used textbook on eBay for much less than the price at her university's bookstore is an example of a market.
Norm paints the fence in his front yard on his day off is an example of a market.
Norm paints the fence in his front yard on his day off is an example of a market.
Mitchell buys 50 shares of General Motors stock at the going price per share is an example of a market.
Mitchell buys 50 shares of General Motors stock at the going price per share is an example of a market.
What is the concept of demand?
What is the concept of demand?
What is the basic proposition of the law of demand?
What is the basic proposition of the law of demand?
In a market economy, there is a ____________________________ relationship between the price of a good and the amount of a good that buyers are willing and able to purchase.
In a market economy, there is a ____________________________ relationship between the price of a good and the amount of a good that buyers are willing and able to purchase.
What describes a movement along the demand curve when college students reduce the amount of detergent used for each load in response to higher prices?
What describes a movement along the demand curve when college students reduce the amount of detergent used for each load in response to higher prices?
What describes a movement along the demand curve when college students rush to buy discount furniture because of an unexpected price drop?
What describes a movement along the demand curve when college students rush to buy discount furniture because of an unexpected price drop?
What describes a shift in the demand curve when college students purchase many more energy drinks during finals week than usual?
What describes a shift in the demand curve when college students purchase many more energy drinks during finals week than usual?
What leads to a shift in the demand curve when students eat out more often due to increased grant money?
What leads to a shift in the demand curve when students eat out more often due to increased grant money?
What can cause a shift in the demand curve?
What can cause a shift in the demand curve?
Provide an example or illustration of the law of demand.
Provide an example or illustration of the law of demand.
In the context of normal or inferior goods, what happens when Billy's mom increases his weekly allowance?
In the context of normal or inferior goods, what happens when Billy's mom increases his weekly allowance?
In the context of normal and inferior goods, what does Susan do after receiving a performance bonus?
In the context of normal and inferior goods, what does Susan do after receiving a performance bonus?
In the context of normal and inferior goods, what does Mike's switch to generic cereal illustrate?
In the context of normal and inferior goods, what does Mike's switch to generic cereal illustrate?
In the context of normal and inferior goods, what happens when Molly loses clients?
In the context of normal and inferior goods, what happens when Molly loses clients?
What is the maximum amount of a product sellers are willing to provide for sale called?
What is the maximum amount of a product sellers are willing to provide for sale called?
What describes the statement that when the market price of a good increases, the amount sellers are willing to offer for sale increases?
What describes the statement that when the market price of a good increases, the amount sellers are willing to offer for sale increases?
What can cause a shift in the supply curve?
What can cause a shift in the supply curve?
According to the law of supply, if the price of a kayak increases, what happens?
According to the law of supply, if the price of a kayak increases, what happens?
What title describes the scenario where Farmer Jack will supply 5 bushels of apples instead of 10 as price decreases?
What title describes the scenario where Farmer Jack will supply 5 bushels of apples instead of 10 as price decreases?
What title describes the scenario with Johnny the jeweler expecting rising jewelry prices later?
What title describes the scenario with Johnny the jeweler expecting rising jewelry prices later?
What title describes the scenario where an impending nuclear holocaust leads people to stock up on snack cakes?
What title describes the scenario where an impending nuclear holocaust leads people to stock up on snack cakes?
What title describes the scenario of disinterest in purchasing Super Bowl tickets due to extreme weather?
What title describes the scenario of disinterest in purchasing Super Bowl tickets due to extreme weather?
Study Notes
Supply and Demand Concepts
- Substitute Goods: A decrease in the price of one good causing a decrease in demand for another indicates they are substitute goods.
- Supply Curve: Generally upward-sloping, reflecting that higher prices typically lead to higher quantities supplied.
- Price and Shortages: A shortage of a good leads to an increase in its price as demand exceeds supply.
Demand Shifts
- Demand Determinants: Fewer potential consumers lead to a leftward shift in the demand curve.
- Normal vs. Inferior Goods:
- Normal goods, like sushi for Shannon post-pay raise, see increased demand with higher income.
- Inferior goods, like macaroni and cheese for Cassie, see decreased demand as income rises.
- Complementary Goods: Rising prices of one good lead to decreased demand for complementary goods, such as hot dog buns when hot dog prices rise.
Equilibrium and Market Behavior
- Equilibrium Price: The price where quantity demanded equals quantity supplied.
- Price Changes Impact on Demand: An increase in prices typically results in decreased quantity demanded for goods, such as tomatoes with frost damage.
- Market Equilibrium: Prices adjust based on shifts in supply and demand, tending toward equilibrium naturally.
Supply Shifts
- Supply Curve Movement: Fewer sellers cause the supply curve for a product to shift leftward; opposite shifts can occur due to increased oil prices affecting dependent goods.
- Determinants of Supply: Shifts can be caused by changes in factors influencing supply, resulting in higher or lower quantities at various price levels.
Market Situations
- Market vs. Non-Market: Transactions like buying tickets or obtaining a soda from a machine constitute market activities; caring for family members or receiving government assistance do not.
- Law of Supply: As prices increase, sellers are typically more willing to supply more of a good.
Demand Curve Dynamics
- Movement vs. Shift: Individual responses to price changes signify movement along the demand curve, while broader changes in consumer preferences indicate a shift in the demand curve.
- Tastes and Preferences: A change in preferences decreasing desire for a good leads to a leftward shift in the demand curve.
Additional Key Terms
- Demand Schedule: A table depicting quantities purchased at various prices.
- Shortage Representation: Displayed by the distance between supply and demand curves when prices fall below equilibrium.
- Price Expectations: Anticipations of future price decreases can shift current supply curves to the right.
Situational Changes and Responses
- Quantity Supplied vs. Supply Change: Changes in specific quantities supplied relate to price changes, whereas broader changes signify a change in supply.
- Economic Institutions: A market is defined as the environment facilitating the exchange of goods and services.
- Consumer Behavior: Students' purchasing shifts during periods of financial aid illustrate demand curve shifts due to economic conditions.
These notes encapsulate essential definitions and principles related to supply and demand, illustrating the dynamics of market interactions and consumer behavior.
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Test your knowledge of essential concepts in Economics with these flashcards focused on Supply and Demand. Each card covers key terms and definitions necessary for understanding market dynamics. Perfect for review or study sessions in ECON 2302.
