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Questions and Answers
A change in __________ causes a movement along the supply curve.
A change in __________ causes a movement along the supply curve.
product price
Which of the following reasons is NOT an explanation for why the demand curve slopes downward and to the right?
Which of the following reasons is NOT an explanation for why the demand curve slopes downward and to the right?
With a price ceiling, quantity ________ will exceed quantity _________, resulting in a persistent shortage of product.
With a price ceiling, quantity ________ will exceed quantity _________, resulting in a persistent shortage of product.
demanded; supplied
A decrease in equilibrium price and indeterminate result on equilibrium quantity is a result of which of the following?
A decrease in equilibrium price and indeterminate result on equilibrium quantity is a result of which of the following?
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Which of the following summarizes the determinants of supply and their net effect on the supply curve?
Which of the following summarizes the determinants of supply and their net effect on the supply curve?
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Among the following products, which best exemplifies a normal good?
Among the following products, which best exemplifies a normal good?
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The demand by a consumer for a good or service essentially reflects the ___________ benefit of the good or service, based on the utility received.
The demand by a consumer for a good or service essentially reflects the ___________ benefit of the good or service, based on the utility received.
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A change in ____________ causes the supply curve of a product to shift leftward or rightward.
A change in ____________ causes the supply curve of a product to shift leftward or rightward.
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Buyers and sellers are brought together in a __________________.
Buyers and sellers are brought together in a __________________.
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Which of the following consists of a large number of independently acting buyers and sellers?
Which of the following consists of a large number of independently acting buyers and sellers?
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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.
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.
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Which of the following are determinants of demand?
Which of the following are determinants of demand?
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All of the following are determinants of demand, except: price of substitutes in production.
All of the following are determinants of demand, except: price of substitutes in production.
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The law of demand describes a(n) ______________ relationship between the price of a good or service and the quantity demanded of that good or service.
The law of demand describes a(n) ______________ relationship between the price of a good or service and the quantity demanded of that good or service.
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A shortage results from an excess of quantity _____________.
A shortage results from an excess of quantity _____________.
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Which of the following are determinants of supply?
Which of the following are determinants of supply?
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A decrease in demand while holding supply constant results in _____________ in both equilibrium price and quantity.
A decrease in demand while holding supply constant results in _____________ in both equilibrium price and quantity.
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A price __________ is the maximum legal price a seller may charge for a product or service.
A price __________ is the maximum legal price a seller may charge for a product or service.
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The vast majority of goods that are not related to one another are called ____________ goods.
The vast majority of goods that are not related to one another are called ____________ goods.
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Producer expectations of future prices are a determinant of ____________.
Producer expectations of future prices are a determinant of ____________.
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Which determines market price and equilibrium output in a market?
Which determines market price and equilibrium output in a market?
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Improvements in technology are a determinant of _________.
Improvements in technology are a determinant of _________.
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Which of the following types of goods affect the demand for another product due to a change in their price?
Which of the following types of goods affect the demand for another product due to a change in their price?
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Market ______________ is a schedule or curve showing that the various amounts of a product that producers supply.
Market ______________ is a schedule or curve showing that the various amounts of a product that producers supply.
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The number of sellers or competitors in a market is a determinant or shifter of the _____________ curve.
The number of sellers or competitors in a market is a determinant or shifter of the _____________ curve.
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Which of the following are determinants of supply 2?
Which of the following are determinants of supply 2?
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__________________ in supply while holding demand constant results in an increase in equilibrium price, but a decrease in equilibrium quantity.
__________________ in supply while holding demand constant results in an increase in equilibrium price, but a decrease in equilibrium quantity.
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_____________ resource prices raise production costs and, assuming a fixed product price, ____________ profits.
_____________ resource prices raise production costs and, assuming a fixed product price, ____________ profits.
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Products whose demand varies directly with changes in money or income are called normal or _______________ goods.
Products whose demand varies directly with changes in money or income are called normal or _______________ goods.
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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.
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.
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Which of the following refers to a particular apportionment or mix of goods and services most highly valued by society?
Which of the following refers to a particular apportionment or mix of goods and services most highly valued by society?
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The supply curve illustrates the relationship between:
The supply curve illustrates the relationship between:
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The income effect is best described as _____________ increasing the purchasing power of income, enabling consumers to purchase _____________ of a product and vice versa.
The income effect is best described as _____________ increasing the purchasing power of income, enabling consumers to purchase _____________ of a product and vice versa.
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The ______________ of supply are any factors other than the product's ______________ that have an effect on the supply of a good or service and cause the supply curve to shift.
The ______________ of supply are any factors other than the product's ______________ that have an effect on the supply of a good or service and cause the supply curve to shift.
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A price ______________ is a legally mandated price imposed above the price, otherwise known as equilibrium price, that would be established between buyers and sellers in a free market.
A price ______________ is a legally mandated price imposed above the price, otherwise known as equilibrium price, that would be established between buyers and sellers in a free market.
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Choose all of the following that will cause a change in supply, not quantity supplied.
Choose all of the following that will cause a change in supply, not quantity supplied.
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When two variables are being examined, and one variable moves one way and the other variable moves in the opposite direction, this is called a(n)
When two variables are being examined, and one variable moves one way and the other variable moves in the opposite direction, this is called a(n)
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Government may place legal limits on prices when it is determined that prices are unfairly ______________ for buyers or unfairly ______________ for sellers.
Government may place legal limits on prices when it is determined that prices are unfairly ______________ for buyers or unfairly ______________ for sellers.
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Price and quantity supplied have a(n) ______________ relationship.
Price and quantity supplied have a(n) ______________ relationship.
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Other things equal, firms will produce and offer for sale ___________ of their product at a high price than at a low price.
Other things equal, firms will produce and offer for sale ___________ of their product at a high price than at a low price.
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The _____________ of supply are any factors other than the product's ____________ that have an effect on the supply of a good or service and cause the supply curve to shift.
The _____________ of supply are any factors other than the product's ____________ that have an effect on the supply of a good or service and cause the supply curve to shift.
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When each additional worker of a firm produces less additional output than previously added workers, then the marginal cost of additional units of output:
When each additional worker of a firm produces less additional output than previously added workers, then the marginal cost of additional units of output:
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Substitution in production is a determinant of _______________.
Substitution in production is a determinant of _______________.
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An increase in supply while holding demand constant results in a(n) ______________ in equilibrium price, but a(n) _____________ in equilibrium quantity.
An increase in supply while holding demand constant results in a(n) ______________ in equilibrium price, but a(n) _____________ in equilibrium quantity.
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Consumers experience ___________ marginal utility the more they consume of a particular good or service.
Consumers experience ___________ marginal utility the more they consume of a particular good or service.
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The numbers of buyers is a determinant of market _____________.
The numbers of buyers is a determinant of market _____________.
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A surplus is also known as an excess of _______________.
A surplus is also known as an excess of _______________.
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Government-controlled prices in the form of price ceilings and price floors result in:
Government-controlled prices in the form of price ceilings and price floors result in:
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If costs of production rise, the producer has an incentive to produce ______________ output.
If costs of production rise, the producer has an incentive to produce ______________ output.
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Quantity demanded is illustrated on the _____________ axis, while price is illustrated on the _____________ axis.
Quantity demanded is illustrated on the _____________ axis, while price is illustrated on the _____________ axis.
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When the government provides financial assistance for the production of a good which lowers producers' costs and increases supply, it is called a _____________.
When the government provides financial assistance for the production of a good which lowers producers' costs and increases supply, it is called a _____________.
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A demand curve measures quantity ___________ on the horizontal axis and ___________ on the vertical axis.
A demand curve measures quantity ___________ on the horizontal axis and ___________ on the vertical axis.
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Government-controlled prices cause:
Government-controlled prices cause:
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Products that have decreased demand when consumer incomes rise and increased demand when consumer incomes fall are called ____________ goods.
Products that have decreased demand when consumer incomes rise and increased demand when consumer incomes fall are called ____________ goods.
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Equilibrium price is otherwise known as market-____________ price.
Equilibrium price is otherwise known as market-____________ price.
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A price _____________ is a legally mandated price imposed above the price, otherwise known as equilibrium price, that would be established between buyers and sellers in a free market.
A price _____________ is a legally mandated price imposed above the price, otherwise known as equilibrium price, that would be established between buyers and sellers in a free market.
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The production of a good or service in the least costly way is known as ___________ efficiency.
The production of a good or service in the least costly way is known as ___________ efficiency.
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A buyer's intentions or plans in regard to the purchase of a product is known as:
A buyer's intentions or plans in regard to the purchase of a product is known as:
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Which of the following shows the effects on equilibrium price and quantity due to an increase in demand, while holding everything else constant?
Which of the following shows the effects on equilibrium price and quantity due to an increase in demand, while holding everything else constant?
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Government may place legal limits on prices when it is determined that prices are unfairly ____________ for buyers or unfairly ____________ for sellers.
Government may place legal limits on prices when it is determined that prices are unfairly ____________ for buyers or unfairly ____________ for sellers.
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One of the determinants of demand is __________ expectations.
One of the determinants of demand is __________ expectations.
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In free markets, though prices will rise and fall, ________ and __________ will always be achieved.
In free markets, though prices will rise and fall, ________ and __________ will always be achieved.
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Which of the following are substitutes?
Which of the following are substitutes?
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The added cost of producing one more unit of output is called ____________ cost.
The added cost of producing one more unit of output is called ____________ cost.
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Government-controlled prices in the form of price ___________ and price ___________ stifle the rationing function of prices, distort resource allocation, and cause negative side-effects.
Government-controlled prices in the form of price ___________ and price ___________ stifle the rationing function of prices, distort resource allocation, and cause negative side-effects.
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An increase in supply and a simultaneous and proportional decrease in demand will result in a(n) ____________ in equilibrium price, with no effect on equilibrium quantity.
An increase in supply and a simultaneous and proportional decrease in demand will result in a(n) ____________ in equilibrium price, with no effect on equilibrium quantity.
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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:
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:
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A change in demand occurs due to a change in the consumer's mind about purchasing a product that is based on something other than the __________ of the product.
A change in demand occurs due to a change in the consumer's mind about purchasing a product that is based on something other than the __________ of the product.
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The price of new cars and the sale of new cars represents:
The price of new cars and the sale of new cars represents:
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____________ goods are used together with other goods.
____________ goods are used together with other goods.
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At the equilibrium price, quantity _____________ equals quantity ___________.
At the equilibrium price, quantity _____________ equals quantity ___________.
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Which of the following scenarios describe the appropriate effects on equilibrium price and quantity due to a decrease in supply while holding everything else constant?
Which of the following scenarios describe the appropriate effects on equilibrium price and quantity due to a decrease in supply while holding everything else constant?
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If the government subsidizes the production of a good, it in effect __________ the producers' costs and __________ supply.
If the government subsidizes the production of a good, it in effect __________ the producers' costs and __________ supply.
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The market demand curve is the ___________ of all ___________ demand curves for a good or service.
The market demand curve is the ___________ of all ___________ demand curves for a good or service.
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____________ benefit is the additional utility gained from consuming one more unit of a good or service.
____________ benefit is the additional utility gained from consuming one more unit of a good or service.
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If an increase in supply is smaller than a decrease in demand, the equilibrium quantity will _____________.
If an increase in supply is smaller than a decrease in demand, the equilibrium quantity will _____________.
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Which of the following results in a decrease in the equilibrium quantity and an indeterminate change in price?
Which of the following results in a decrease in the equilibrium quantity and an indeterminate change in price?
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If the supply of corn increases, holding demand constant, the equilibrium price of corn will _________ and the quantity will ___________.
If the supply of corn increases, holding demand constant, the equilibrium price of corn will _________ and the quantity will ___________.
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A decrease in supply and a simultaneous and proportional decrease in demand will result in ________ equilibrium quantity, with __________ equilibrium price.
A decrease in supply and a simultaneous and proportional decrease in demand will result in ________ equilibrium quantity, with __________ equilibrium price.
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A simultaneous and proportional increase in supply and demand will result in a(n) ____________ in equilibrium quantity, with no effect on equilibrium price.
A simultaneous and proportional increase in supply and demand will result in a(n) ____________ in equilibrium quantity, with no effect on equilibrium price.
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When a factor other than price affects consumption of a good or service, the demand curve can shift ____________ or ____________.
When a factor other than price affects consumption of a good or service, the demand curve can shift ____________ or ____________.
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A decrease in supply and proportional increase in demand will result in a(n) ___________ in equilibrium price, with no effect on equilibrium quantity.
A decrease in supply and proportional increase in demand will result in a(n) ___________ in equilibrium price, with no effect on equilibrium quantity.
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Which of the following best explains why economists 'sound the alarm' when politicians advocate government-controlled prices such as price ceilings or price floors?
Which of the following best explains why economists 'sound the alarm' when politicians advocate government-controlled prices such as price ceilings or price floors?
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An economic unit, meaning a household, firm, or government, should continue to engage in an activity so long as the marginal ____________ exceeds the marginal ____________.
An economic unit, meaning a household, firm, or government, should continue to engage in an activity so long as the marginal ____________ exceeds the marginal ____________.
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______________ refers to the production of a product, whereas demand refers to the consumption of a product.
______________ refers to the production of a product, whereas demand refers to the consumption of a product.
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Identify those statements that correctly state the effects on equilibrium price and quantity as a result of changes in supply and/or demand?
Identify those statements that correctly state the effects on equilibrium price and quantity as a result of changes in supply and/or demand?
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Which of the following describe the effects on equilibrium price and equilibrium quantity as a result of a decrease in supply and a simultaneous and proportional increase in demand?
Which of the following describe the effects on equilibrium price and equilibrium quantity as a result of a decrease in supply and a simultaneous and proportional increase in demand?
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The market supply curve is the horizontal __________ of all the ___________ supply curves for a good or service.
The market supply curve is the horizontal __________ of all the ___________ supply curves for a good or service.
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The _______________ of a good or service by a producer essentially reflects the marginal cost of producing the good or service.
The _______________ of a good or service by a producer essentially reflects the marginal cost of producing the good or service.
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The fundamental characteristic of demand, other things equal, is that as the price falls, the quantity demanded for a product _____________.
The fundamental characteristic of demand, other things equal, is that as the price falls, the quantity demanded for a product _____________.
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A change in quantity demanded is caused by an increase or decrease in the ______________ of the product under consideration and nothing else.
A change in quantity demanded is caused by an increase or decrease in the ______________ of the product under consideration and nothing else.
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A change in quantity demanded is caused by an increase or decrease in the __________ of the product under consideration and nothing else.
A change in quantity demanded is caused by an increase or decrease in the __________ of the product under consideration and nothing else.
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What are the ways that government can cope with a surplus?
What are the ways that government can cope with a surplus?
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A change in quantity supplied is caused by an increase or decrease in the ____________ of the product under consideration and nothing else.
A change in quantity supplied is caused by an increase or decrease in the ____________ of the product under consideration and nothing else.
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An increase in the sales, property, or any other tax will ______________ production costs and _____________ supply.
An increase in the sales, property, or any other tax will ______________ production costs and _____________ supply.
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If a decline in demand is greater than an increase in supply, the equilibrium quantity will ____________.
If a decline in demand is greater than an increase in supply, the equilibrium quantity will ____________.
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Which of the following statements summarize the winners and losers of a government-controlled market?
Which of the following statements summarize the winners and losers of a government-controlled market?
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If a decrease in supply is greater than a decrease in demand, equilibrium price will
If a decrease in supply is greater than a decrease in demand, equilibrium price will
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Diminishing marginal utility states that less satisfaction is derived from each successive unit of a product consumed. Therefore, the law of demand is upheld because, as each successive unit yields __________, consumers will buy additional units only if the price of those units is progressively __________.
Diminishing marginal utility states that less satisfaction is derived from each successive unit of a product consumed. Therefore, the law of demand is upheld because, as each successive unit yields __________, consumers will buy additional units only if the price of those units is progressively __________.
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A favorable change in consumer tastes and preferences for a product will ___________ demand, illustrated as a shift of the demand curve to the _____________.
A favorable change in consumer tastes and preferences for a product will ___________ demand, illustrated as a shift of the demand curve to the _____________.
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Study Notes
Market Fundamentals
- A market is where buyers and sellers interact to exchange goods or services.
- Competitive markets feature many independently acting buyers and sellers.
Demand Characteristics
- Demand is expressed as a schedule or curve indicating product consumption at various prices.
- Key determinants of demand include consumer tastes, income changes, related goods' prices, consumer expectations, and the number of buyers.
Supply Concepts
- Supply is affected by factors like resource prices, taxes, subsidies, and technological changes.
- A shift in supply can lead to an increase or decrease in equilibrium price and quantity.
Price Mechanisms
- The law of demand states there is an inverse relationship between price and quantity demanded.
- Price ceilings (maximum allowable price) and price floors (minimum allowable price) can distort market equilibrium.
Equilibrium Price and Quantity
- At equilibrium, the quantity demanded equals the quantity supplied.
- Changes in demand or supply lead to shifts in equilibrium price and quantity.
Elasticity of Demand and Supply
- Diminishing marginal utility indicates that additional consumption yields less satisfaction, impacting demand.
- Substitution in production affects supply based on relative prices of goods.
Types of Goods
- Normal goods see increased demand with rising income, while inferior goods experience decreased demand as income rises.
- Complementary goods have interrelated demand affecting each other; substitutes can replace one another.
Market Dynamics
- Government interventions such as subsidies can lower production costs, increasing supply.
- Shortages occur when quantity demanded exceeds quantity supplied, while surpluses happen when supply exceeds demand.
Effects of Shifts in Demand and Supply
- An increase in demand typically raises both equilibrium price and quantity.
- Conversely, a decrease in demand while supply holds constant leads to declines in both equilibrium price and quantity.
Consumer Behavior
- Consumers adjust their purchasing based on changes in their expectations, leading to shifts in demand.
- The number of buyers in a market directly affects demand levels.
Production Costs and Efficiency
- Production costs influence supply decisions; higher costs may decrease supply.
- Productive efficiency is achieved when goods are produced at the lowest cost.
Impact of External Factors
- Government price controls can lead to unintended side effects like shortages or market distortions.
- Changes in resource prices lead to shifts in the supply curve, affecting overall supply dynamics.
Summary of Economic Principles
- Marginal benefit and cost principles dictate that activities should continue until marginal benefits exceed marginal costs.
- Market supply and demand curves represent aggregated behaviors of individual consumers and producers, affecting pricing and resource allocation.
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Description
Test your understanding of key concepts from Chapter 3 of Economics. These flashcards cover essential terms related to markets, demand, and competitive markets, helping you reinforce your knowledge in a fun and interactive way.
