Econ Chapter 4 Flashcards

Questions and Answers

What is quantity demanded?

The amount of a good, service, or resource that people are willing and able to buy during a specified period at a specified price.

What is the law of demand?

If the price of the good rises, the quantity demanded decreases. If the price falls, the quantity demanded increases.

What is demand?

The relationship between the quantity demanded and the price of a good when all other influences on buying plans remain the same.

What is a demand schedule?

A list of the quantities demanded at each different price when all the other influences on buying plans remain the same. Signup and view all the answers

What is a demand curve?

A graph of the relationship between the quantity demanded of a good and its price when all other influences on buying plans remain the same. Signup and view all the answers

What is market demand?

The sum of the demands of all the buyers in a market. Signup and view all the answers

What is a change in demand?

A change in the quantity that people plan to buy when any influence other than the price of the good changes. Signup and view all the answers

When demand decreases, what happens to the demand curve?

It shifts left Signup and view all the answers

What happens to the demand curve when demand increases?

It shifts right Signup and view all the answers

What are the 6 main influences on buying plans that change demand?

<ol> <li>Prices of related goods 2. Expected future prices 3. Income 4. Expected future income and credit 5. Number of buyers 6. Preferences</li> </ol> Signup and view all the answers

What is a substitute?

A good that can be consumed in place of another good. Signup and view all the answers

What is a complement?

A good that is consumed with another good. Signup and view all the answers

What effect do expected future prices have on current demand?

A rise in the expected future price of a good increases the current demand for that good; a fall decreases current demand. Signup and view all the answers

What is a normal good?

A good for which the demand increases if income increases and demand decreases if income decreases. Signup and view all the answers

What is an inferior good?

A good for which the demand decreases if income increases and demand increases if income decreases. Signup and view all the answers

What is the change in quantity demanded?

A change in the quantity of a good that people plan to buy that results from a change in the price of the good. Signup and view all the answers

What happens to quantity demanded if the price of a good increases?

It decreases and there is a movement up the demand curve. Signup and view all the answers

What happens to quantity demanded if the price of a good decreases?

It increases and there is a movement down along the demand curve. Signup and view all the answers

What is quantity supplied?

The amount of a good, service, or resource that people are willing and able to sell during a specified period at a specified price. Signup and view all the answers

What is the law of supply?

If the price of a good rises, the quantity supplied increases. If the price falls, the quantity supplied decreases. Signup and view all the answers

What is a supply schedule?

A list of the quantities supplied at each different price when all other influences on selling plans remain the same. Signup and view all the answers

What is a supply curve?

A graph of the relationship between the quantity supplied and the price of a good when all other influences on selling plans remain the same. Signup and view all the answers

What is market supply?

The sum of the supplies of all sellers in a market. Signup and view all the answers

What is a change in supply?

A change in the quantity that suppliers plan to sell when any influence on selling plans other than the price of the good changes. Signup and view all the answers

When supply decreases, what happens to the supply curve?

It shifts left Signup and view all the answers

What happens to the supply curve when supply increases?

It shifts right Signup and view all the answers

What are the 5 main influences on selling plans that change supply?

<ol> <li>Prices of related goods 2. Prices of resources and other inputs 3. Expected future prices 4. Number of sellers 5. Productivity</li> </ol> Signup and view all the answers

What is a substitute in production?

A good that can be produced in place of another good. Signup and view all the answers

What is a complement in production?

A good that is produced along with another good. Signup and view all the answers

How do prices of resources and inputs affect supply?

Higher resource prices increase production costs, leading to a smaller quantity supplied. Signup and view all the answers

How does productivity affect supply?

An increase in productivity lowers costs and increases supply; a decrease raises costs and decreases supply. Signup and view all the answers

What is change in quantity supplied?

A change in the quantity of a good that suppliers plan to sell that results from a change in the price of the good. Signup and view all the answers

What happens if the price of a good falls regarding quantity supplied?

It decreases and there is a movement down the supply curve. Signup and view all the answers

What happens if there is a decrease in supply?

Supply decreases and the curve shifts left. Signup and view all the answers

What happens if the price of a good rises regarding quantity supplied?

It increases and there is a movement up along the supply curve. Signup and view all the answers

What happens if there is an increase in supply?

Supply increases and the supply curve shifts right. Signup and view all the answers

What is market equilibrium?

Occurs when the quantity demanded equals the quantity supplied. Signup and view all the answers

What is equilibrium price?

The price at which the quantity demanded equals the quantity supplied. Signup and view all the answers

What is equilibrium quantity?

The quantity bought and sold at the equilibrium price. Signup and view all the answers

What is the law of market forces?

When there is a shortage, the price rises. When there is a surplus, the price falls. Signup and view all the answers

What is a shortage?

When the quantity demanded exceeds the quantity supplied. Signup and view all the answers

What is a surplus?

The quantity supplied exceeds the quantity demanded. Signup and view all the answers

What happens to market equilibrium when demand changes?

The supply curve does not shift, but there is a change in the quantity supplied. Signup and view all the answers

What happens to market equilibrium when supply changes?

The demand curve does not shift, but there is a change in the quantity demanded. Signup and view all the answers

What happens to market equilibrium when both supply and demand increase?

Increases the equilibrium quantity; the change in equilibrium price is ambiguous. Signup and view all the answers

What happens to market equilibrium when both supply and demand decrease?

Decreases the equilibrium quantity; the change in equilibrium price is ambiguous. Signup and view all the answers

What happens to market equilibrium when demand increases and supply decreases?

Raises the equilibrium price; the change in the equilibrium quantity is ambiguous. Signup and view all the answers

What happens to market equilibrium when demand decreases and supply increases?

Lowers the equilibrium price; the change in the equilibrium quantity is ambiguous. Signup and view all the answers

Study Notes

Demand Concepts

Quantity Demanded: The amount of a good or service consumers are willing and able to buy at a particular price during a specific time frame.
Law of Demand: Price and quantity demanded are inversely related; higher prices lead to lower quantity demanded, while lower prices lead to higher quantity demanded.
Demand: Describes the relationship between price and quantity demanded, assuming other factors influencing buying remain constant.
Demand Schedule: A tabulated list showing quantities demanded at various prices, with all other influences on buying held constant.
Demand Curve: A graphical representation of the demand relationship, illustrating how quantity demanded changes with price under constant conditions.

Market Dynamics

Market Demand: The total quantity demanded by all consumers in a market; the aggregate of individual demands.
Change in Demand: Occurs when factors other than price (like income or preferences) affect the quantity consumers want to buy.
Demand Curve Shifts: A leftward shift indicates a decrease in demand, while a rightward shift shows an increase in demand, influenced by various factors.

Influences on Demand

Main Influences on Demand: Includes prices of related goods, expected future prices, consumer income, expected future income and credit, number of buyers, and consumer preferences.
Substitutes: Goods that can replace others; if a substitute’s price rises, the demand for the related good increases, and vice versa.
Complements: Goods consumed together; a drop in the price of a complement raises demand for the associated good, and vice versa.

Types of Goods

Normal Good: Demand rises with an increase in income and falls with a decrease.
Inferior Good: Demand decreases as income rises and increases as income falls.

Supply Concepts

Quantity Supplied: Amount of a good or service producers are willing and able to sell at a particular price during a designated time period.
Law of Supply: There is a direct relationship between price and quantity supplied; rising prices lead to more supplied, while falling prices lead to less.
Supply Schedule: A chart outlining quantities supplied at different prices, with other selling influences constant.
Supply Curve: Graphically represents the relationship between price and quantity supplied.

Market Equilibrium

Market Equilibrium: Achieved when the quantity demanded equals the quantity supplied, defining both equilibrium price and quantity.
Equilibrium Price: The price point where supply and demand meet.
Equilibrium Quantity: The amount of goods bought and sold at equilibrium price.

Changes in Market Conditions

Shortage: Occurs when demand exceeds supply, leading to upward pressure on prices.
Surplus: Happens when supply exceeds demand, causing downward pressure on prices.
Effect of Demand Changes: A shift in demand alters equilibrium price and quantity in the same direction as demand changes, while supply remains constant.
Effect of Supply Changes: A shift in supply changes quantity demanded and alters equilibrium price in the same direction as supply changes, but opposite for quantity.

Combined Changes in Supply and Demand

Simultaneous Changes:
- Increase in both supply and demand raises equilibrium quantity; price change is ambiguous.
- Decrease in both supply and demand lowers equilibrium quantity; price impact varies.
- Increasing demand with a decrease in supply raises equilibrium price; quantity impact is ambiguous.
- Decreasing demand with an increase in supply lowers equilibrium price; quantity change is uncertain.

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Test your understanding of key concepts from Economics Chapter 4 with these flashcards. Cover important definitions like Quantity Demanded and the Law of Demand. Perfect for quick self-assessment and revision.