Economics Chapter 3 Flashcards

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Questions and Answers

What does the term ceteris paribus mean?

All else equal (correct)

Quantity supplied

Demand curve shift

Market equilibrium

Which of the following would cause a shift in the demand curve from point A to point B?

Increase in consumer income

Change in consumer preferences

Change in the price of related goods

All of the above (correct)

What is a demand schedule?

A table showing the relationship between the price of a product and the quantity of the product

What is quantity demanded?

The amount of a good or service that a consumer is willing and able to purchase at a given price Signup and view all the answers

What is a demand curve?

A curve that shows the relationship between the price of a product and the quantity of the product demanded Signup and view all the answers

What is market demand?

The demand by all the consumers of a given good or service Signup and view all the answers

What is the law of demand?

The rule that holding everything else constant when the price of a product falls, the quantity sold goes up; when the price goes up, the quantity sold goes down. Signup and view all the answers

What is a normal good?

A good for which the demand increases as income rises and decreases as income falls Signup and view all the answers

What is an inferior good?

A good for which the demand increases as income falls and decreases as income rises Signup and view all the answers

What conditions define a perfectly competitive market?

A market that meets the conditions of many buyers and sellers, all firms selling identical products, and no barriers to new firms entering the market. Signup and view all the answers

What are substitute goods?

Goods/services that can be used for the same purpose Signup and view all the answers

What are complements?

Goods/services that are used together Signup and view all the answers

What is the law of supply?

Holding everything else constant, increases in price cause increases in the quantity supplied and decreases in price cause decreases in quantity supplied. Signup and view all the answers

What is a supply schedule?

A table showing the relationship between the price of a product and the quantity of the product supplied Signup and view all the answers

What is quantity supplied?

The amount of a good or service that a firm is willing and able to supply at a given price Signup and view all the answers

What is a supply curve?

A curve that shows the relationship between the price of a product and the quantity of the product supplied Signup and view all the answers

What is market equilibrium?

A situation in which quantity demanded equals quantity supplied Signup and view all the answers

An increase in supply decreases the equilibrium price. The decrease in price increases demand.

False Signup and view all the answers

Study Notes

Economic Terms and Definitions

Ceteris Paribus: Latin term meaning "all else equal," used in economic analysis to isolate the effects of one variable while holding others constant.
Demand Curve Shift: Transition from point A to point B on a demand curve due to various factors, including changes in consumer preferences, income, or prices of related goods.
Demand Schedule: A structured table illustrating the relationship between product price and the quantity demanded by consumers at various price points.
Quantity Demanded: The specific amount of a good or service that consumers are willing and able to purchase at a set price.
Demand Curve: A graphical representation of the relationship between the price of a product and the total quantity demanded, typically downward sloping.
Market Demand: The total demand for a good or service aggregating the preferences of all consumers within a market.
Law of Demand: Economic principle stating that, with everything else held constant, when product prices decrease, the quantity demanded increases, and vice versa.
Normal Goods: Products for which demand rises with an increase in consumer income and falls when income decreases.
Inferior Goods: Products whose demand increases when consumer income decreases and declines when income rises.
Perfect Competition: Market structure characterized by numerous buyers and sellers, identical products sold by all firms, and no entry barriers for new competitors.
Substitute Goods: Goods or services that fulfill similar needs or purposes, allowing consumers to switch from one to another based on price changes.
Complements: Products or services that are consumed together, where the consumption of one enhances the use of the other.

Supply Concepts

Law of Supply: Economic rule indicating that, all else being constant, an increase in the price of a product leads to an increase in the quantity supplied, while a decrease in price results in a decreased quantity supplied.
Supply Schedule: A table that demonstrates the relationship between the price of a product and the quantity supplied across different price levels.
Quantity Supplied: The specific amount of a good or service that a supplier is willing and able to offer at a certain price.
Supply Curve: A graphical illustration depicting the relationship between the price of a product and the quantity supplied, typically upward sloping.

Market Dynamics

Market Equilibrium: A state where the quantity demanded by consumers matches the quantity supplied by producers, resulting in a balanced market.
Impact of Supply Increase: An increase in supply typically results in a decrease in equilibrium price; however, price changes influence quantity demanded, not the demand curve itself.

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Description

Test your knowledge with these flashcards covering key concepts from Chapter 3 of your economics course. Each card features a term and its definition, helping you grasp essential economic principles such as ceteris paribus and the demand curve. Perfect for review and preparation for exams.