Economics Chapter 3 Flashcards

Questions and Answers

The downward slope of the demand curve again illustrates the pattern that as _ rises, __ decreases.

price, quantity demanded

The nature of demand indicates that as the price of a good increases:

Buyers desire to purchase less of it. (correct)

More of it is produced.

Suppliers wish to sell less of it.

More of it is desired.

Any given demand or supply curve is based on the ceteris paribus assumption that __________________________.

all else is held equal

The term 'ceteris paribus' means that:

All variables except those specified are constant. Signup and view all the answers

A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and _________________, shown on the horizontal axis.

quantity supplied Signup and view all the answers

Economists refer to the relationship that a higher price leads to a lower quantity demanded as the ___________________.

law of demand Signup and view all the answers

A demand curve shows the relationship between price and ______________ on a graph.

quantity demanded Signup and view all the answers

_____________ refers to the total number of units that are demanded at a specific price.

quantity demanded Signup and view all the answers

In economics, the demand for a good refers to the amount of the good that people:

will want to buy at various prices Signup and view all the answers

The demand curve for a typical good has a(n):

Negative slope. Signup and view all the answers

When economists talk about supply, they are referring to a relationship between price received for each unit sold and the ______________.

quantity supplied Signup and view all the answers

But nearly all supply curves share a basic similarity: they slope ______________.

up from left to right Signup and view all the answers

The demand schedule for a good:

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

When quantity demanded decreases in response to a change in its own price:

There is a movement up along the demand curve. Signup and view all the answers

The _________ is the only price where quantity demanded is equal to quantity supplied.

equilibrium price Signup and view all the answers

After widespread press reports about the dangers of contracting 'mad cow disease' by consuming beef from Canada, the likely economic effect on the U.S. demand curve for beef from Canada is:

A shift of the demand curve for beef to the left. Signup and view all the answers

Using the graph and beginning on D1, a shift to D2 would indicate a(n):

Increase in demand. Signup and view all the answers

A change from Point A to Point B represents a(n):

Decrease in quantity demanded. Signup and view all the answers

If new manufacturers enter the computer industry, then (ceteris paribus):

The supply curve shifts to the right. Signup and view all the answers

If a firm faces _____________________, while the prices for the output the firm produces remain unchanged, its supply curve will shift right, indicating an increase in supply.

lower costs of production Signup and view all the answers

When __________________, a firm will supply a higher quantity at any given price for its output, and the supply curve will shift to the right.

costs of production fall Signup and view all the answers

A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of:

The supply curve. Signup and view all the answers

A change from Point A to Point E represents a(n):

Decrease in supply. Signup and view all the answers

A change from Point A to Point D represents a(n):

Decrease in supply. Signup and view all the answers

A change from Point A to Point B represents a(n):

Increase in quantity supplied. Signup and view all the answers

A drought decreases the supply of agricultural products, which means that at any given price a lower quantity will be supplied; conversely, especially good weather would shift the _________________________.

supply curve to the right Signup and view all the answers

A change in price of a good or service typically causes ________________ for that specific good or service.

A change along the supply curve Signup and view all the answers

According to the law of supply:

There is a direct relationship between price and the quantity supplied. Signup and view all the answers

Which of the following would reduce the supply of microcomputers?

Higher wage rates for the workers that assemble the computers Signup and view all the answers

Interpret the following statement: 'An increase in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market.'

The statement is correct. Signup and view all the answers

___________________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling.

Price floors Signup and view all the answers

Amy loves to bake and views apples and sugar as complements to one another. If the price of sugar decreases, economists would expect:

Amy's demand for apples to increase. Signup and view all the answers

If a decrease in the price of Good X causes a decrease in the demand for Good Y, we can conclude that:

Goods X and Y are substitute goods. Signup and view all the answers

If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as ________________.

excess demand or shortage Signup and view all the answers

The _______________ is the quantity where quantity demanded and quantity supplied are equal at a certain price.

equilibrium quantity Signup and view all the answers

A deadweight loss occurs when:

Price is artificially kept above or below equilibrium. Signup and view all the answers

Study Notes

Demand and Supply Basics

As price rises, quantity demanded decreases; illustrated by the law of demand.
Demand is affected by buyers' desire; higher prices generally lead to lesser demand.
Ceteris paribus means "all else is held equal," a stabilizing assumption in economic models.
Demand curves typically slope downward, representing a negative relationship between price and quantity demanded.

Demand Curve and Quantity Demanded

A demand curve shows the relationship between price and quantity demanded.
Quantity demanded refers to total units consumers are willing to buy at a specific price.
Increase in demand shifts the demand curve to the right; a decrease shifts it left.
Movements along the curve are due to price changes, not shifts of the curve itself.

Understanding Supply

Supply curves graphically represent the relationship between price and quantity supplied, with an upward slope, indicating higher prices incentivize increased supply.
Supply is influenced by factors like production costs and number of sellers in the market.
A movement up along the supply curve represents an increase in quantity supplied due to price changes.

Market Equilibrium

Equilibrium price is the point where quantity demanded equals quantity supplied.
At prices below equilibrium, demand exceeds supply, creating a shortage; prices above cause a surplus.
Shifts in supply and demand curves affect market equilibrium and prices.

Effects of External Factors on Demand and Supply

Negative reports (e.g., health warnings) may shift a product's demand curve leftward, indicating decreased demand.
Positive changes (e.g., entering new manufacturers) cause the supply curve to shift right, indicating increased supply.
Weather events can disrupt supply; e.g., crop damage results in decreased supply.

Relationships Between Goods

Complements are goods that are consumed together; a drop in the price of one leads to increased demand for the other.
Substitutes are alternatives; if the price of one falls, the demand for its substitute may decrease.
The concepts of normal goods indicate an increase in income leads to increased demand.

Additional Economic Concepts

Deadweight loss occurs when the market is distorted by external price controls, such as price ceilings or floors.
Price floors are set to prevent prices from falling below a certain level, which can create surpluses in the market.
Quantity supplied will rise if production costs fall, independent of demand shifts.

Key Terminology

Equilibrium Quantity: The quantity where quantity demanded and supplied are equal.
Excess Demand (Shortage): Occurs when the quantity demanded outstrips quantity supplied at a given price.
Excess Supply (Surplus): Happens when quantity supplied exceeds quantity demanded.
Law of Supply: Highlights the direct relationship between price and quantity supplied.

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Test your understanding of the concepts from Chapter 3 of Economics with these flashcards. This quiz covers key definitions and principles related to demand and pricing. Perfect for students preparing for exams or needing a refresher on essential economic concepts.

Economics Chapter 3 Flashcards

Questions and Answers

The downward slope of the demand curve again illustrates the pattern that as _____________ rises, ______________ decreases.

The nature of demand indicates that as the price of a good increases:

Any given demand or supply curve is based on the ceteris paribus assumption that __________________________.

The term 'ceteris paribus' means that:

A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and _________________, shown on the horizontal axis.

Economists refer to the relationship that a higher price leads to a lower quantity demanded as the ___________________.

A demand curve shows the relationship between price and ______________ on a graph.

_____________ refers to the total number of units that are demanded at a specific price.

In economics, the demand for a good refers to the amount of the good that people:

The demand curve for a typical good has a(n):

When economists talk about supply, they are referring to a relationship between price received for each unit sold and the ______________.

But nearly all supply curves share a basic similarity: they slope ______________.

The demand schedule for a good:

When quantity demanded decreases in response to a change in its own price:

The _________ is the only price where quantity demanded is equal to quantity supplied.

After widespread press reports about the dangers of contracting 'mad cow disease' by consuming beef from Canada, the likely economic effect on the U.S. demand curve for beef from Canada is:

Using the graph and beginning on D1, a shift to D2 would indicate a(n):

A change from Point A to Point B represents a(n):

If new manufacturers enter the computer industry, then (ceteris paribus):

If a firm faces _____________________, while the prices for the output the firm produces remain unchanged, its supply curve will shift right, indicating an increase in supply.

When __________________, a firm will supply a higher quantity at any given price for its output, and the supply curve will shift to the right.

A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of:

A change from Point A to Point E represents a(n):

A change from Point A to Point D represents a(n):

A change from Point A to Point B represents a(n):

A drought decreases the supply of agricultural products, which means that at any given price a lower quantity will be supplied; conversely, especially good weather would shift the _________________________.

A change in price of a good or service typically causes ________________ for that specific good or service.

According to the law of supply:

Which of the following would reduce the supply of microcomputers?

Interpret the following statement: 'An increase in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market.'

___________________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling.

Amy loves to bake and views apples and sugar as complements to one another. If the price of sugar decreases, economists would expect:

If a decrease in the price of Good X causes a decrease in the demand for Good Y, we can conclude that:

If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as ________________.

The _______________ is the quantity where quantity demanded and quantity supplied are equal at a certain price.

A deadweight loss occurs when:

Study Notes

Demand and Supply Basics

Demand Curve and Quantity Demanded

Understanding Supply

Market Equilibrium

Effects of External Factors on Demand and Supply

Relationships Between Goods

Additional Economic Concepts

Key Terminology

Studying That Suits You

Description

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The downward slope of the demand curve again illustrates the pattern that as _ rises, __ decreases.