ECON Chapter 3 Flashcards

Questions and Answers

What happens when the quantity supplied exceeds the quantity demanded?

There is a surplus.

What do suppliers do to eliminate a surplus?

Cut prices (correct)

Increase prices

Increase demand

Reduce supply

What is true at the equilibrium price for gasoline?

Everyone with the desire and income to buy gasoline can do so, and all sellers willing and able to sell can do so.

Which of the following would increase the quantity of LCD TVs demanded but would not increase the demand for LCD TVs?

A decrease in price Signup and view all the answers

What does the demand schedule for a good indicate?

Indicates the quantities that will be purchased at alternative market prices. Signup and view all the answers

If the price of music downloads decreases, what is most likely to occur?

Quantity demanded will increase Signup and view all the answers

What does a decrease in supply mean for producers?

Producers are now willing to produce and sell less at any given price. Signup and view all the answers

What will happen if consumer incomes decrease?

None of the other answers is correct Signup and view all the answers

In economics, what does the demand for a good refer to?

The amount of the good people will buy at various prices. Signup and view all the answers

What does an upward-sloping supply curve indicate?

Suppliers are willing to increase production if they receive higher prices. Signup and view all the answers

If the price of Good A decreases, what happens to the demand for Good B?

The demand for Good B increases. Signup and view all the answers

What does a supply schedule show?

How many units producers are willing to sell at various prices. Signup and view all the answers

What does the market supply schedule reflect?

The total quantity supplied at each price by all producers. Signup and view all the answers

Which of the following would NOT cause a change in the supply of milk?

An increase in the price of milk Signup and view all the answers

Which of the following would not shift the supply curve for swordfish?

An increase in the price of swordfish Signup and view all the answers

What is the difference between a change in quantity supplied and a change in supply?

A change in quantity supplied is caused by a change in a good’s own price; a change in supply is due to another variable. Signup and view all the answers

What does the law of demand state?

There is an inverse relationship between the price of a good and the quantity demanded. Signup and view all the answers

If the price of tennis rackets were to increase, what is expected?

The demand for tennis balls will decrease Signup and view all the answers

What does each point on the supply curve show?

The quantity supplied at that price. Signup and view all the answers

What does the supply curve show?

How the quantity produced varies with price. Signup and view all the answers

Which of the following is most likely to be an inferior good?

Used clothing Signup and view all the answers

What is true of a competitive market?

Buyers and sellers have little market power. Signup and view all the answers

A change in which of the following variables does not cause a change in demand?

Prices of unrelated goods Signup and view all the answers

What would likely cause a reduction in the supply of Nintendo video games?

An increase in the price of computer chips Signup and view all the answers

When there is an excess quantity supplied of a product at the current price, what must be true?

The market price is above equilibrium price. Signup and view all the answers

Which of the following describes equilibrium in a market?

At equilibrium, quantity demanded equals quantity supplied. Signup and view all the answers

What happens if vacancy rates in an apartment complex increase?

Rent will decrease leading to an increase in quantity demanded. Signup and view all the answers

When there is an excess quantity demanded of a product at the current price, what happens?

The price will tend to rise. Signup and view all the answers

What does it mean if a shortage exists in the market for strawberries?

The quantity demanded exceeds the quantity supplied and the market price is below the equilibrium price. Signup and view all the answers

What is incorrect about the statement: 'Demand exceeds the available quantity of apartment housing'?

It confuses 'demand' with 'quantity demanded.' Signup and view all the answers

If weather conditions destroy a substantial portion of the available coffee crop, what is the likely outcome?

The demand for tea will increase. Signup and view all the answers

If there is a surplus, will be frustrated by their inability to exchange at the current price, and they will the prices as a result.

sellers; lower Signup and view all the answers

Study Notes

Demand Schedule and Curve

A demand schedule displays quantities of a good purchased at various market prices, holding other factors constant (ceteris paribus).
A decrease in the price of a good leads to an increase in quantity demanded, as illustrated by the Law of Demand, which describes the inverse relationship between price and quantity demanded.
A shift in the demand curve occurs only due to changes in factors other than the price, such as income, tastes, and prices of related goods.

Supply Schedule and Curve

A supply schedule outlines how many units producers are willing to sell at different prices, adhering to the Law of Supply, where higher prices typically lead to increased quantity supplied.
A decrease in supply is indicated by a leftward shift of the supply curve, resulting from factors like increased input prices, higher prices for substitutes in production, or expectations of future price increases.
Differentiating between quantity supplied (affected by a price change) and supply (affected by other variables) is crucial; a shift in demand or supply curves indicates changes due to these factors.

Market Equilibrium

At market equilibrium, quantity demanded equals quantity supplied. Deviations from this equilibrium create surpluses or shortages.
A surplus occurs when quantity supplied exceeds quantity demanded, prompting sellers to lower prices to stimulate sales.
Conversely, a shortage happens when quantity demanded exceeds quantity supplied, leading to upward pressure on prices as consumers bid for limited goods.

Complementary and Substitute Goods

Complementary goods see an increase in demand for one when the price decreases for the other (e.g., tennis rackets and tennis balls).
Substitute goods result in increased demand for one when the price rises for the other (e.g., coffee and tea).

Inferior and Normal Goods

Inferior goods experience decreased demand when consumer incomes rise; used clothing is an example.
Normal goods see increased demand as consumer incomes rise.

Competitive Markets

Competitive markets have numerous buyers and sellers with little market power, resulting in prices determined by supply and demand dynamics.
Changes in the prices of unrelated goods do not impact the demand for a specific product, while changes in substitutes or complements do affect demand.

Responses to Price Changes

A decrease in price generally increases the quantity demanded but does not shift the demand curve itself.
Input cost increases, such as for computer chips in video games, typically lead to a decrease in supply due to raised production costs.

Summary of Economic Principles

Understanding the difference between demand and quantity demanded, as well as supply and quantity supplied, is essential for analyzing market behavior.
Tying in these concepts with real-world examples illustrates the dynamics of consumer behavior in response to price changes and market conditions.

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Description

This quiz consists of flashcards covering key terms from Chapter 3 of economics. Each card presents a word along with its definition, aiding in understanding important concepts related to demand schedules and pricing. Ideal for students looking to reinforce their economic vocabulary.