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Questions and Answers
The downward slope of the demand curve again illustrates the pattern that as _____________ rises, ______________ decreases.
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:
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 __________________________.
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:
The term 'ceteris paribus' means that:
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A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and _________________, shown on the horizontal axis.
A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and _________________, shown on the horizontal axis.
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Economists refer to the relationship that a higher price leads to a lower quantity demanded as the ___________________.
Economists refer to the relationship that a higher price leads to a lower quantity demanded as the ___________________.
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A demand curve shows the relationship between price and ______________ on a graph.
A demand curve shows the relationship between price and ______________ on a graph.
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_____________ refers to the total number of units that are demanded at a specific price.
_____________ refers to the total number of units that are demanded at a specific price.
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In economics, the demand for a good refers to the amount of the good that people:
In economics, the demand for a good refers to the amount of the good that people:
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The demand curve for a typical good has a(n):
The demand curve for a typical good has a(n):
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When economists talk about supply, they are referring to a relationship between price received for each unit sold and the ______________.
When economists talk about supply, they are referring to a relationship between price received for each unit sold and the ______________.
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But nearly all supply curves share a basic similarity: they slope ______________.
But nearly all supply curves share a basic similarity: they slope ______________.
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The demand schedule for a good:
The demand schedule for a good:
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When quantity demanded decreases in response to a change in its own price:
When quantity demanded decreases in response to a change in its own price:
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The _________ is the only price where quantity demanded is equal to quantity supplied.
The _________ is the only price where quantity demanded is equal to quantity supplied.
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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:
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:
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Using the graph and beginning on D1, a shift to D2 would indicate a(n):
Using the graph and beginning on D1, a shift to D2 would indicate a(n):
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A change from Point A to Point B represents a(n):
A change from Point A to Point B represents a(n):
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If new manufacturers enter the computer industry, then (ceteris paribus):
If new manufacturers enter the computer industry, then (ceteris paribus):
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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.
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.
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When __________________, a firm will supply a higher quantity at any given price for its output, and the supply curve will shift to the right.
When __________________, a firm will supply a higher quantity at any given price for its output, and the supply curve will shift to the right.
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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 severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of:
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A change from Point A to Point E represents a(n):
A change from Point A to Point E represents a(n):
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A change from Point A to Point D represents a(n):
A change from Point A to Point D represents a(n):
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A change from Point A to Point B represents a(n):
A change from Point A to Point B represents a(n):
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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 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 _________________________.
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A change in price of a good or service typically causes ________________ for that specific good or service.
A change in price of a good or service typically causes ________________ for that specific good or service.
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According to the law of supply:
According to the law of supply:
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Which of the following would reduce the supply of microcomputers?
Which of the following would reduce the supply of microcomputers?
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Interpret the following statement: 'An increase in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market.'
Interpret the following statement: 'An increase in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market.'
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___________________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling.
___________________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling.
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Amy loves to bake and views apples and sugar as complements to one another. If the price of sugar decreases, economists would expect:
Amy loves to bake and views apples and sugar as complements to one another. If the price of sugar decreases, economists would expect:
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If a decrease in the price of Good X causes a decrease in the demand for Good Y, we can conclude that:
If a decrease in the price of Good X causes a decrease in the demand for Good Y, we can conclude that:
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If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as ________________.
If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as ________________.
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The _______________ is the quantity where quantity demanded and quantity supplied are equal at a certain price.
The _______________ is the quantity where quantity demanded and quantity supplied are equal at a certain price.
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A deadweight loss occurs when:
A deadweight loss occurs when:
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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.
Studying That Suits You
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Description
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.
