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Questions and Answers
When does the quantity demanded equal the quantity supplied?
Equilibrium price
What occurs when the market price is above the equilibrium price?
Surplus
What happens when the market price is below the equilibrium price?
Shortage
What does the supply curve show?
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The law of supply states that as the price of a good rises, the quantity supplied falls.
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The determinants of how much producers want to sell include input prices, technology, expectations, and the number of __________.
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What model do economists use to analyze competitive markets?
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What are the determinants of how much consumers want to buy?
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How can you get rid of a surplus?
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What does allocated efficiency mean?
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What sends signals to the producers to know what to sell?
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What is the number one cost to companies?
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What happens when the government gives companies money to produce more goods?
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Producers should always be aware of what?
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How can you eliminate shortages?
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What does the X on the graph equal?
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What is a group of buyers and sellers of a particular good or service called?
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What defines a competitive market?
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What is the amount of a good that buyers are willing and able to purchase called?
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What claim does the law of demand make?
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What is a table that shows the relationship between the price of a good and the quantity demanded called?
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What is a graph of the relationship between the price of a good and the quantity demanded called?
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What do you call a good for which an increase in income leads to a decrease in demand?
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What are two goods for which an increase in the price of one leads to an increase in the demand for the other called?
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What are two goods for which an increase in the price of one leads to a decrease in the demand for the other called?
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What is the amount of a good that sellers are willing and able to sell called?
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What is a table that shows the relationship between the price of a good and the quantity supplied called?
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What is a graph of the relationship between the price of a good and the quantity supplied called?
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What is a situation in which quantity supplied equals quantity demanded called?
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What is the price that balances quantity supplied and quantity demanded?
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What is the quantity supplied and quantity demanded at the equilibrium price referred to as?
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What is a situation in which quantity supplied is greater than quantity demanded called?
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What is a situation in which quantity demanded is greater than quantity supplied called?
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What did command systems refer to historically?
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What determinant plays the central role in determining the quantity of any demanded good?
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What markets are the easiest to analyze?
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The demand curve, which graphs the demand schedule, slopes downward.
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What is the sum of all the individual demands for a particular good or service called?
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What does lower income signify in terms of purchasing power?
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A normal good is one for which demand decreases when income increases.
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What happens when the price of one good falls and it raises the demand of another good?
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What is the most obvious determinant of your demand?
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What may your personal expectations about the future affect?
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What variables can shift the demand curve?
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Any change that raises the quantity that buyers wish to purchase at any given price shifts the demand curve to the __________.
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Any change that lowers the quantity that buyers wish to purchase at any given price shifts the demand curve to the _______.
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Study Notes
Equilibrium and Market Dynamics
- Equilibrium Price: The price at which quantity demanded equals quantity supplied.
- Surplus: Occurs when the market price exceeds the equilibrium price, leading to a drop in market price.
- Shortage: Happens when market price is below equilibrium, causing prices to increase.
Supply and Demand Curves
- Supply Curve: Illustrates how quantity supplied varies with price; slopes upward due to the law of supply.
- Law of Supply: As prices rise, the quantity supplied increases.
- Demand Curve: Reflects how quantity demanded changes with price; slopes downward according to the law of demand.
Market Analysis
- Supply and Demand Model: Economists use this framework to analyze competitive markets.
- Competitive Market: Characterized by numerous buyers and sellers where individual actions do not significantly influence prices.
Factors Influencing Supply and Demand
- Determinants of Supply: Include input prices, technology, producer expectations, and the number of sellers; any change can shift the supply curve.
- Determinants of Demand: Include price, consumer income, prices of substitutes and complements, tastes, expectations, and the number of buyers; shifts in any of these factors affect demand.
Market Adjustments
- Eliminating Surplus: Achieved by lowering prices to boost demand.
- Eliminating Shortages: Can be resolved by increasing prices to reduce demand.
Efficiency and Competition
- Allocated Efficiency: Achieving production that meets consumers' wants and needs.
- Price Signals: The price system informs producers about what to supply based on market demand.
Understanding Goods
- Normal Good: Demand increases as consumer income rises.
- Inferior Good: Demand decreases with a rise in income.
- Substitutes: Goods where an increase in the price of one leads to increased demand for the other.
- Complements: Goods whose demand is affected inversely by the price changes of another; e.g., price drop in one leads to higher demand for the other.
Demand and Supply Schedules
- Demand Schedule: A tabulated representation outlining how quantity demanded correlates with price.
- Supply Schedule: A table showing the relationship between price and quantity supplied.
Market Situations
- Equilibrium Quantity: The supply and demand level at equilibrium price.
- Market Demand: The aggregated demand from all individual consumers for a specific good or service.
- Overarching Determinants: Price is the pivotal factor influencing the quantity of any good demanded.
Behavioral Influences
- Taste: A primary determinant affecting the demand for goods based on consumer preferences.
- Expectations: Future expectations can significantly sway current demand for goods and services.
Demand Curve Shifts
- A rightward shift occurs when buyer interest increases at any set price.
- A leftward shift indicates a decrease in the quantity buyers wish to purchase at any price.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your knowledge with these flashcards focused on Chapter 4 of Macroeconomics. Key concepts covered include equilibrium price, surplus, shortage, and the supply curve. Perfect for students looking to reinforce their understanding of market dynamics.
