Macroeconomics Chapter 4 Flashcards

Questions and Answers

What does a movement from one point to another on a fixed curve represent?

A movement from one point to another on a fixed curve.

The fundamental characteristic of demand, other things equal, is that as price falls, the quantity demanded for a product ____________.

Rises

The _________ curve shows the seller's minimum acceptable price at each unit of the product.

Supply

Improvements in technology are a determinant of __________.

Supply Signup and view all the answers

An increase in the sales, property or any other tax will production costs and supply.

Increase & decrease Signup and view all the answers

Quantity demanded is illustrated on the _ axis, while price is illustrated on the _ axis.

Horizontal & vertical Signup and view all the answers

__________ refers to the production of a product, whereas demand refers to the buyers who consume the product.

Supply Signup and view all the answers

The market demand curve is the __ of all demand curves for a good or service.

Summation & Individual Signup and view all the answers

What is likely to increase product demand?

An increase in the number of buyers. Signup and view all the answers

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.

Price Signup and view all the answers

For many people, Coke and Pepsi are substitutes.

False Signup and view all the answers

A change in quantity supplied is caused by an increase or decrease in the ________ of the product under consideration and nothing else.

Price Signup and view all the answers

How can the inverse relationship between price and quantity demanded be graphically illustrated?

A downward sloping curve. Signup and view all the answers

An increase in the price of Coke will change the __ for Coke while an increase in the price of Pepsi will change the _ for Coke.

Quantity demanded & demand Signup and view all the answers

The determinants of demand, other things equal, are assumed to be constant when a demand curve is drawn or computed.

True Signup and view all the answers

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 .

Less and less utility & reduced Signup and view all the answers

Other things equal, the fundamental characteristic of the law of ________ is that as the price falls, the quantity supplied of a product falls.

Supply Signup and view all the answers

We obtain the market supply curve by 'vertically adding' the supply curves of the individual producers.

False Signup and view all the answers

A change in supply is represented by a movement along the curve, not a shift of the curve.

False Signup and view all the answers

The law of _________ is illustrated by a downward-sloping curve.

Demand Signup and view all the answers

Which of the following is likely to cause an increase in the demand for a good or service? (Select one)

An increase in the number of buyers Signup and view all the answers

On the supply and demand model, quantity demanded is illustrated on the vertical axis, while price is illustrated on the horizontal axis.

False Signup and view all the answers

A change in quantity demanded is caused by an increase or decrease in the _______________ of the product under consideration and nothing else.

Price Signup and view all the answers

Both land and labor would be bought and sold in the ________ market.

Resource Signup and view all the answers

The ongoing supply of a good or service by a producer essentially reflects the _________ of producing the good or service.

Marginal cost Signup and view all the answers

Which pair exemplifies complementary goods? (Select one)

A hot dog and relish Signup and view all the answers

Why is the 'other-things-equal' assumption important to the law of demand?

Factors other than the price of the product affect the amount of a product purchased. Signup and view all the answers

Consumers experience ________ marginal utility the more they consume of a particular good or service.

diminishing Signup and view all the answers

Which of the following are the key components of the market system? (Select all that apply)

Prices Signup and view all the answers

Producer expectations of future prices are a determinant of ___________

supply Signup and view all the answers

Buyers and sellers are brought together in a __________.

market Signup and view all the answers

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):

inverse relationship Signup and view all the answers

Which of the following types of goods affect the demand for a product due to a change in their price? (Select all that apply)

Complementary goods Signup and view all the answers

Consumer expectations are a determinant of supply.

False Signup and view all the answers

The number of sellers or competitors in a market is a determinant of _________

supply Signup and view all the answers

Which of the following are determinants of demand? (Select all that apply)

Consumer tastes Signup and view all the answers

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.

determinants & price Signup and view all the answers

All of the following exemplify an improvement in technology affecting supply, except:

Increased subsidies to farmers for producing corn for its conversion to ethanol Signup and view all the answers

On the supply and demand model, quantity demanded is illustrated on the vertical axis, while price is illustrated on the horizontal axis.

False Signup and view all the answers

Which of the following describes the law of demand? (Select all that apply)

All other things being equal, as price decreases, quantity demanded increases Signup and view all the answers

Market ____________ is a schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each possible price during a specific period.

supply Signup and view all the answers

The added cost of producing one more unit of output is called _______ cost.

marginal Signup and view all the answers

Which of the following are determinants of supply? (Select all that apply)

Taxes and subsidies Signup and view all the answers

The number of buyers in a market is a determinant of demand.

True Signup and view all the answers

Which of the following refers to government financial assistance for the production of a good which lowers producers' costs and increases supply?

A subsidy Signup and view all the answers

If costs of production rise, the producer has an incentive to produce _______ output at every possible cost.

less Signup and view all the answers

Which of the following are reasons for the inverse relationship between price and quantity demanded? (Select all that apply)

People ordinarily buy more of a product at a low price than at a high price Signup and view all the answers

Price and quantity supplied have a _________ relationship.

direct Signup and view all the answers

The law of supply states that as price , the quantity supplied rises; as price _, the quantity falls.

increases & decreases Signup and view all the answers

The supply curve illustrates the relationship between:

price & quantity supplied Signup and view all the answers

Which of the following are determinants of supply? (Select all that apply)

Subsidies Signup and view all the answers

Which of the following are components of the circular flow model? (Select all that apply)

Households Signup and view all the answers

A _____________ is an institution or mechanism that brings buyers and sellers into contact.

market Signup and view all the answers

Products whose demand varies directly with changes in money or income are called normal or ________ goods.

superior Signup and view all the answers

Which of the following refers to demand?

The buyer side of any market Signup and view all the answers

A vast majority of goods unrelated to one another are called independent goods.

True Signup and view all the answers

The law of demand describes an ________ relationship between the price of a good or service and the quantity demanded of that good or service.

inverse Signup and view all the answers

A demand curve shows the plotted:

inverse relationship between price and quantity demanded for any product Signup and view all the answers

On a supply curve, _______ is labeled on the vertical axis.

price Signup and view all the answers

The prices of factor inputs used in the production process help determine the costs of production incurred by firms.

True Signup and view all the answers

Which of the following decrease demand? (Select all that apply)

Falling incomes and the product is a normal good Signup and view all the answers

Which of the following are substitutes? (Select all that apply)

Pepsi and Coca-Cola Signup and view all the answers

When the price of one product rises, the demand for its substitute will ___________.

rise Signup and view all the answers

From an economic perspective, which of the following are true of a market? (Select all that apply)

The pursuit of buyers and sellers in making themselves better off Signup and view all the answers

_ factor prices raise production costs and, assuming a fixed product price, _ profits.

higher & reduce Signup and view all the answers

Funds that businesses pay for resources are costs to businesses, but they represent which of the following types of flows to households? (Select all that apply)

Interest Signup and view all the answers

The two parties involved in a circular flow model are:

households & businesses Signup and view all the answers

Products that have decreased demand when consumer incomes rise and increased demand when consumer incomes fall are called _________ goods.

inferior Signup and view all the answers

The determinant of supply dealing with alternative products that can be produced by firms is called:

prices of substitutes in production Signup and view all the answers

Which of the following are examples of a market? (Select all that apply)

eBay Signup and view all the answers

Other things equal, as a buyer's income rises, the willingness and ability to buy a normal product ___________.

rises Signup and view all the answers

A complementary good is one that is used in place for another good.

False Signup and view all the answers

A demand organizes the relationship between price and quantity in a tabular format, whereas the demand is a graphical representation of this relationship.

schedule & curve Signup and view all the answers

A buyer's intentions or plans in regard to the purchase of a product is known as:

demand Signup and view all the answers

Which of the following consists of a large number of independently acting buyers and sellers?

A competitive market Signup and view all the answers

In general, a rise in income causes a(n) _ in demand for most products and a fall in income causes a(n) __ in demand for most products, other things equal.

rise & fall Signup and view all the answers

If the price of hot dogs increases, the demand for hot dog buns will __________.

decrease Signup and view all the answers

Other things equal, the fundamental characteristic of supply is:

as price falls, the quantity supplied falls Signup and view all the answers

Which of the following are resources which businesses purchase from households? (Select all that apply)

Labor Signup and view all the answers

Which of the following illustrates the relationship between a good and its complement? (Select all that apply)

When the price of lettuce increases, the demand for salad dressing decreases Signup and view all the answers

Which of the following statements does not exhibit any type of relationship? (Select all that apply)

The price of toothpaste and quantity of cat food consumed Signup and view all the answers

Which of the following would result in a change in supply? (Select all that apply)

An increase or decrease in the wage rate Signup and view all the answers

Choose all of the following that will cause a change in supply rather than a change in quantity supplied. (Select all that apply)

Number of sellers Signup and view all the answers

Changes in determinants of demand will cause a movement along the demand curve.

False Signup and view all the answers

A change in quantity demanded is caused by an increase or decrease in the ___________ of the product under consideration and nothing else.

price Signup and view all the answers

Changes in _ about the future price of a product may affect the producer's current willingness to __ that product.

expectations & supply Signup and view all the answers

As firms leave an industry, supply decreases, illustrated as a shift of the supply curve to the __________.

left Signup and view all the answers

If the government subsidizes the production of a good, it in effect the producers' costs and supply.

decreases & increases Signup and view all the answers

Other things equal, the amount of a product that will be purchased at various possible prices is shown by:

demand Signup and view all the answers

As with labor, plant and ___________ used in the production of one good, can be used in the production of alternative goods.

equipment Signup and view all the answers

The law of ________ is illustrated by a downward-sloping curve.

demand Signup and view all the answers

Which of the following would most likely lead to a decrease in demand? (Select all that apply)

A decrease in fertility rates Signup and view all the answers

The function of businesses in the circular flow model is to resources and ___ products.

purchase & sell Signup and view all the answers

In the circular flow model, households _ resources and products.

sell & buy Signup and view all the answers

Which of the following summarize the determinants of supply and their net effect on the supply curve? (Select all that apply)

A change in resource prices will increase or decrease supply and cause the supply curve to shift to the right or left respectively. Signup and view all the answers

A normal good is an item for which demand _ when income rises and __ when income falls.

rises & falls Signup and view all the answers

If prices for a good or service are expected to increase in the future, demand for that good or service will ____ today. If prices are expected to decrease in the future, demand will _ today.

rise & fall Signup and view all the answers

A the supply curve represents a change in supply while a _ the supply curve represents a change in the quantity supplied.

shift of & movement along Signup and view all the answers

A favorable change in consumer tastes and preferences for a product will _ demand, illustrated as a shift of the demand curve to the _.

increase & right Signup and view all the answers

There is a(n) _________ relationship between the price of a good or service and the quantity demanded for that good or service.

inverse Signup and view all the answers

Study Notes

Marginal Utility and Market Behavior

Consumers experience diminishing marginal utility as consumption of a good increases, meaning satisfaction decreases with each additional unit consumed.
The relationship between price and demand is inverse; as price increases, quantity demanded decreases, and vice versa.

Market System Components

Key components of the market system include prices and markets; government, capital, and investment play lesser direct roles.
Buyers and sellers interact in a market, which can be physical or virtual, allowing for the exchange of goods.

Supply Determinants

Producer expectations regarding future prices heavily influence supply decisions.
The number of sellers in a market also affects supply dynamics.
Important determinants of supply include technology, resource prices, and taxes/subsidies; these factors can shift the supply curve.

Demand Determinants

Key determinants of demand include consumer tastes, expectations, number of buyers, prices of related goods, and changes in income.
Normal goods see increased demand as consumer income rises, while inferior goods see a decrease in demand as income increases.

Relationships in Economics

An inverse relationship is noted when one variable moves in the opposite direction of another, commonly observed between price and quantity demanded/supplied.
A direct relationship exists between price and quantity supplied; higher prices incentivize higher supply.

Market Dynamics

A shift in the supply curve indicates a change in supply, whereas movement along the curve indicates a change in quantity supplied due to price changes.
The law of supply states that as price increases, quantity supplied rises, and as price decreases, quantity supplied falls.

Circular Flow Model

The model consists of households and businesses interacting in resource and product markets.
Households sell resources and buy products, while businesses purchase resources and sell products.

Price Expectations and Demand

If future prices of a good are expected to rise, current demand will increase; if prices are expected to fall, current demand will decrease.
The market demand curve represents the sum of individual demand curves for a good or service.

Complementary and Substitute Goods

Complementary goods are products that are used together, such as hot dogs and hot dog buns; if the price of one rises, demand for the complement may fall.
Substitute goods are those that can replace one another; for example, an increase in Coke's price may increase the demand for Pepsi.

Taxes and Costs

Government intervention through subsidies can lower production costs and increase supply; conversely, increased taxes can raise costs and decrease supply.
The relationship between resource prices and production costs is direct; higher resource prices lead to higher production costs.

Demand and Supply Curves

Demand and supply curves illustrate the relationships among price, quantity, and market behavior; they provide insights into consumer and producer responses to market changes.
A demand shift to the right indicates increased demand at all prices, often due to favorable changes in consumer preferences or an increase in buyers.

Conclusion

Understanding these fundamental concepts is critical to analyzing economic interactions in markets. Changes in consumer behaviors, external market shifts, and internal economic conditions continuously shape both supply and demand dynamics.

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Test your understanding of key concepts from Chapter 4 of Macroeconomics with these flashcards. Explore important terms like diminishing marginal utility, market components, and supply determinants. Perfect for students looking to reinforce their knowledge in macroeconomic principles.

Macroeconomics Chapter 4 Flashcards

Questions and Answers

What does a movement from one point to another on a fixed curve represent?

The fundamental characteristic of demand, other things equal, is that as price falls, the quantity demanded for a product ____________.

The _________ curve shows the seller's minimum acceptable price at each unit of the product.

Improvements in technology are a determinant of __________.

An increase in the sales, property or any other tax will __________ production costs and __________ supply.

Quantity demanded is illustrated on the _________ axis, while price is illustrated on the _________ axis.

__________ refers to the production of a product, whereas demand refers to the buyers who consume the product.

The market demand curve is the __________ of all ________ demand curves for a good or service.

What is likely to increase product demand?

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.

For many people, Coke and Pepsi are substitutes.

A change in quantity supplied is caused by an increase or decrease in the ________ of the product under consideration and nothing else.

How can the inverse relationship between price and quantity demanded be graphically illustrated?

An increase in the price of Coke will change the __________ for Coke while an increase in the price of Pepsi will change the _________ for Coke.

The determinants of demand, other things equal, are assumed to be constant when a demand curve is drawn or computed.

Other things equal, the fundamental characteristic of the law of ________ is that as the price falls, the quantity supplied of a product falls.

We obtain the market supply curve by 'vertically adding' the supply curves of the individual producers.

A change in supply is represented by a movement along the curve, not a shift of the curve.

The law of _________ is illustrated by a downward-sloping curve.

Which of the following is likely to cause an increase in the demand for a good or service? (Select one)

On the supply and demand model, quantity demanded is illustrated on the vertical axis, while price is illustrated on the horizontal axis.

A change in quantity demanded is caused by an increase or decrease in the _______________ of the product under consideration and nothing else.

Both land and labor would be bought and sold in the ________ market.

The ongoing supply of a good or service by a producer essentially reflects the _________ of producing the good or service.

Which pair exemplifies complementary goods? (Select one)

Why is the 'other-things-equal' assumption important to the law of demand?

Consumers experience ________ marginal utility the more they consume of a particular good or service.

Which of the following are the key components of the market system? (Select all that apply)

Producer expectations of future prices are a determinant of ___________

Buyers and sellers are brought together in a __________.

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):

Which of the following types of goods affect the demand for a product due to a change in their price? (Select all that apply)

Consumer expectations are a determinant of supply.

The number of sellers or competitors in a market is a determinant of _________

Which of the following are determinants of demand? (Select all that apply)

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.

All of the following exemplify an improvement in technology affecting supply, except:

On the supply and demand model, quantity demanded is illustrated on the vertical axis, while price is illustrated on the horizontal axis.

Which of the following describes the law of demand? (Select all that apply)

Market ____________ is a schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each possible price during a specific period.

The added cost of producing one more unit of output is called _______ cost.

Which of the following are determinants of supply? (Select all that apply)

The number of buyers in a market is a determinant of demand.

Which of the following refers to government financial assistance for the production of a good which lowers producers' costs and increases supply?

If costs of production rise, the producer has an incentive to produce _______ output at every possible cost.

Which of the following are reasons for the inverse relationship between price and quantity demanded? (Select all that apply)

Price and quantity supplied have a _________ relationship.

The law of supply states that as price ________, the quantity supplied rises; as price _________, the quantity falls.

The supply curve illustrates the relationship between:

Which of the following are determinants of supply? (Select all that apply)

Which of the following are components of the circular flow model? (Select all that apply)

A _____________ is an institution or mechanism that brings buyers and sellers into contact.

Products whose demand varies directly with changes in money or income are called normal or ________ goods.

Which of the following refers to demand?

A vast majority of goods unrelated to one another are called independent goods.

The law of demand describes an ________ relationship between the price of a good or service and the quantity demanded of that good or service.

A demand curve shows the plotted:

On a supply curve, _______ is labeled on the vertical axis.

The prices of factor inputs used in the production process help determine the costs of production incurred by firms.

Which of the following decrease demand? (Select all that apply)

Which of the following are substitutes? (Select all that apply)

When the price of one product rises, the demand for its substitute will ___________.

From an economic perspective, which of the following are true of a market? (Select all that apply)

_______ factor prices raise production costs and, assuming a fixed product price, _______ profits.

Funds that businesses pay for resources are costs to businesses, but they represent which of the following types of flows to households? (Select all that apply)

The two parties involved in a circular flow model are:

Products that have decreased demand when consumer incomes rise and increased demand when consumer incomes fall are called _________ goods.

The determinant of supply dealing with alternative products that can be produced by firms is called:

Which of the following are examples of a market? (Select all that apply)

Other things equal, as a buyer's income rises, the willingness and ability to buy a normal product ___________.

A complementary good is one that is used in place for another good.

A demand ____________ organizes the relationship between price and quantity in a tabular format, whereas the demand ____________ is a graphical representation of this relationship.

A buyer's intentions or plans in regard to the purchase of a product is known as:

Which of the following consists of a large number of independently acting buyers and sellers?

In general, a rise in income causes a(n) ___________ in demand for most products and a fall in income causes a(n) ____________ in demand for most products, other things equal.

If the price of hot dogs increases, the demand for hot dog buns will __________.

Other things equal, the fundamental characteristic of supply is:

Which of the following are resources which businesses purchase from households? (Select all that apply)

An increase in the sales, property or any other tax will production costs and supply.

Quantity demanded is illustrated on the _ axis, while price is illustrated on the _ axis.

The market demand curve is the __ of all demand curves for a good or service.

An increase in the price of Coke will change the __ for Coke while an increase in the price of Pepsi will change the _ for Coke.

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 law of supply states that as price , the quantity supplied rises; as price _, the quantity falls.

_ factor prices raise production costs and, assuming a fixed product price, _ profits.

A demand organizes the relationship between price and quantity in a tabular format, whereas the demand is a graphical representation of this relationship.

In general, a rise in income causes a(n) _ in demand for most products and a fall in income causes a(n) __ in demand for most products, other things equal.

Changes in _ about the future price of a product may affect the producer's current willingness to __ that product.

If the government subsidizes the production of a good, it in effect the producers' costs and supply.

The function of businesses in the circular flow model is to resources and ___ products.

In the circular flow model, households _ resources and products.

A normal good is an item for which demand _ when income rises and __ when income falls.

If prices for a good or service are expected to increase in the future, demand for that good or service will ____ today. If prices are expected to decrease in the future, demand will _ today.

A the supply curve represents a change in supply while a _ the supply curve represents a change in the quantity supplied.

A favorable change in consumer tastes and preferences for a product will _ demand, illustrated as a shift of the demand curve to the _.