Economics Chapter 5 Flashcards

Questions and Answers

What resource used to make clothing came to be in short supply due to bad weather and increased demand?

Silk

Wool

Cotton (correct)

Linen

What new idea arose from the shortage portrayed in the video?

Making fabric from bamboo

According to the Law of Supply, when price goes up, quantity supplied goes up.

True

When supply is elastic and has a change in quantity supplied, due to a change in price, what type of change is it?

More than proportional Signup and view all the answers

When supply is unit elastic and has a change in quantity supplied, due to a change in price, what kind of change is it?

Proportional change Signup and view all the answers

When supply is inelastic and has a change in quantity supplied, due to a change in price, what kind of change is it?

Less proportional change Signup and view all the answers

According to the Law of Supply, there is a direct relationship between price and quantity supplied.

True Signup and view all the answers

Which direction does a supply curve slope?

Upwards Signup and view all the answers

When the price increases, the quantity supplied _______

increases Signup and view all the answers

What are the 5 shifters of supply?

<ol> <li>Price of Resources, 2. Number of Producers, 3. Technology, 4. Taxes and Subsidies, 5. Expectations</li> </ol> Signup and view all the answers

What happens to the supply for a product when the price increases?

False Signup and view all the answers

Price changes the quantity supplied moves:

Along the supply curve Signup and view all the answers

The 5 shifters change the supply moves:

The entire supply curve Signup and view all the answers

Demand curve goes to the ____

dirt Signup and view all the answers

Supply curve goes to the ____

sky Signup and view all the answers

What do you call the exact spot on the graph where quantity demanded exactly equals the quantity supplied?

Equilibrium Signup and view all the answers

What is it called when the quantity supplied is greater than the quantity demanded?

Surplus Signup and view all the answers

What is it called when the quantity demanded is greater than the quantity supplied?

Shortage Signup and view all the answers

Based on what you have learned from the video, when do producers want to produce the most supply?

When price is high Signup and view all the answers

_______________ refers to the amount of a product offered for sale at all possible prices in a market.

Supply Signup and view all the answers

Quantity supplied increases when the price _______________.

increases Signup and view all the answers

A graph that shows the quantities supplied at each and every possible price in the _______________ is called a supply curve.

market Signup and view all the answers

Movement along the supply curve measures a change in _______________ supplied.

quantity Signup and view all the answers

A(n) _______________ is a payment to an individual, business, or other group to encourage or protect a certain type of economic activity.

Subsidy Signup and view all the answers

Which of these results from the repeal of an item's subsidies?

A leftward shift of that item's supply curve Signup and view all the answers

Which of these best describes the influence of high prices on the behavior of producers?

They are an incentive for producers to produce more. Signup and view all the answers

Which of these names the way in which producers regard taxes?

As part of the cost of production Signup and view all the answers

Which of these is the best description of a normal supply curve?

Its slope goes up when the diagram is read from left to right. Signup and view all the answers

Which of these is true of both an individual supply curve and a market supply curve?

A change in quantity supplied takes place only when there is a change in price. Signup and view all the answers

Under what conditions do Big Oil companies decide it's the right time to develop the oil exploration leases they already have?

When the price of oil is very high Signup and view all the answers

According to the video, with gasoline prices at $4 a gallon at the pump, how has Big Oil's refusal to exploit more leases and produce more oil affected the U.S. economy and American consumers?

Consumers pay more for gas, so have less money to spend on other consumer items, which hurts the economy. Signup and view all the answers

According to the graph on Short Run Production, at which stage have too many workers been hired, and the company starts to produce less total product with a negative marginal product?

Stage III Signup and view all the answers

Study Notes

Supply and Demand Basics

Cotton faced a shortage due to severe weather and rising demand, leading to higher fabric production.
The concept of using bamboo as an alternative fabric emerged from this resource scarcity.

Law of Supply

Law of Supply states that as price increases, the quantity supplied also increases.
Supply curves slope upwards, indicating a direct relationship between price and quantity supplied.
Quantity supplied moves along the supply curve in response to price changes.

Elasticity of Supply

Elastic supply indicates a more than proportional change in quantity supplied when prices change.
Unit elastic supply refers to a proportional change in quantity supplied due to price alterations.
Inelastic supply results in less than proportional changes in quantity supplied with price variations.

Supply Shifters

The five key factors that shift supply are:
- Price of resources
- Number of producers
- Technological advances
- Taxes and subsidies
- Expectations of future prices
Changes in these factors result in an entire shift of the supply curve rather than a movement along it.

Market Dynamics

Equilibrium occurs at the point where quantity demanded equals quantity supplied.
Surplus arises when supply exceeds demand, while shortage occurs when demand surpasses supply.
High prices incentivize producers to increase supply.

Supply Representation

Supply represents the total amount of a product available at all price points in a market.
A supply curve graphically illustrates quantities supplied at different price levels in the market.
A movement along the supply curve indicates a change in the quantity supplied, linked directly to price shifts.

Economic Incentives

Subsidies are payments made to encourage specific economic activities, influencing supply.
The removal of subsidies generally results in a leftward shift in the supply curve for affected products.
Producers view taxes as part of their production costs, affecting decisions on supply levels.

Supply Curve Characteristics

Both individual and market supply curves respond to price changes with alterations in quantity supplied.
Big Oil companies tend to develop oil exploration leases when prices are significantly high to maximize revenue.

Impact on Consumers

Increases in gasoline prices lead to decreased disposable income for consumers, negatively affecting overall economic activity.

Production Stages

The third stage of short-run production shows diminishing returns, where employing more workers leads to a reduction in total production.

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Test your knowledge with these flashcards covering key concepts from Economics Chapter 5. Explore topics such as supply and demand, resource management, and innovative solutions to shortages. Perfect for quick revision or deeper understanding!