Microeconomics Chapter 3 Flashcards

Questions and Answers

What does the law of supply state?

Other things remaining the same, the higher the price of a good, the greater is the quantity supplied; and the lower the price of a good, the smaller is the quantity supplied.

What can a supply curve be interpreted as?

A minimum-supply-price curve.

What is marginal cost?

The lowest price at which someone is willing to sell, shown in a supply curve.

A rise in the price of a cellphone the quantity supplied and supply.

increases; does not change Signup and view all the answers

What are substitutes in production?

Goods that a firm can produce by using the same resources. Signup and view all the answers

What happens at the equilibrium price?

Buyers pay the highest price they are willing to pay for the last unit bought, and sellers receive the lowest price at which they are willing to supply the last unit sold. Signup and view all the answers

What is the formula for the equilibrium quantity?

(a−c)/(b + d) Signup and view all the answers

What is the formula for the equilibrium price?

(ad + bc)/(b + d) Signup and view all the answers

What defines a competitive market?

A market that has many buyers and sellers, so no single buyer or seller can influence the price. Signup and view all the answers

What is the money price?

The number of dollars that must be given up. Signup and view all the answers

What is relative price?

The ratio of one money price to another. Signup and view all the answers

What is quantity demanded?

The amount that consumers plan to buy during a period of time at a particular price. Signup and view all the answers

What does the law of demand state?

Other things remaining the same, the higher the price of a good, the smaller is the quantity demanded; and the lower the price of a good, the greater is the quantity demanded. Signup and view all the answers

What is demand?

The relationship between the price of a good and the quantity demanded. Signup and view all the answers

What does the demand curve show?

The relationship between the quantity demanded of a good and its price, everything else remaining the same. Signup and view all the answers

What is a change in the quantity demanded?

A movement along the demand curve. Signup and view all the answers

What is a change in demand?

A shift of the demand curve. Signup and view all the answers

What effect does a rise in the price of a related good (substitute) have on demand?

Increases demand and shifts the demand curve rightward. Signup and view all the answers

What is a complement?

A rise in the price of a good used with another good, decreasing demand and shifting the demand curve leftward. Signup and view all the answers

What effect do expected future prices have on current demand?

Demand increases and the demand curve shifts rightward. Signup and view all the answers

How does income affect demand for a normal good?

An increase in income increases demand and shifts the curve rightward. Signup and view all the answers

How does income affect demand for an inferior good?

An increase in income decreases demand and shifts the demand curve leftward. Signup and view all the answers

Study Notes

Law of Supply

Indicates that with all else held constant, higher prices result in greater quantities supplied.
Conversely, lower prices lead to smaller quantities supplied.

Supply Curve

Represents the minimum-supply-price curve, indicating the lowest price a seller is willing to accept.

Marginal Cost

Relates to the minimum price at which a seller is willing to sell, depicted in the supply curve.

Price Impact on Supply

An increase in cellphone prices results in a higher quantity supplied but does not alter overall market supply.

Substitutes in Production

Refers to goods that can be produced using the same resources, allowing firms flexibility in production choices.

Equilibrium Price Dynamics

At equilibrium price, buyers will pay the maximum they are willing for the last unit, while sellers will receive the minimum they will accept.

Equilibrium Quantity Formula

Calculated using the formula (a−c)/(b + d).

Equilibrium Price Formula

Determined by the formula (ad + bc)/(b + d).

Competitive Market Definition

Characterized by numerous buyers and sellers, ensuring that no single entity can influence the market price.

Money Price

Refers to the monetary amount that must be exchanged for a good.

Relative Price

Defined as the ratio of one money price to another, reflecting the trade-offs between different goods.

Quantity Demanded

Represents the total amount consumers intend to purchase over a specified timeframe at a particular price.

Law of Demand

States that, all else being equal, higher prices lead to a lower quantity demanded, whereas lower prices encourage higher quantities demanded.

Demand Relationship

Establishes the connection between the price of a good and the quantity demanded.

Demand Curve

Visually represents the relationship between quantity demanded and price, holding all other factors constant.

Changes in Demand

Change in Quantity Demanded: Movement along the demand curve, triggered by price changes.
Change in Demand: A shift in the demand curve due to factors other than price.

Substitute Goods

An increase in the price of a substitute good elevates demand for the primary good, shifting the demand curve to the right.

Complement Goods

An increase in the price of a complementary good decreases demand for the related good, shifting the demand curve to the left.

Expected Future Prices

Anticipation of higher future prices can lead to increased current demand, shifting the demand curve to the right.

Income Impact on Demand

For normal goods: An increase in income raises demand, shifting the curve rightward.
For inferior goods: An income increase causes a decrease in demand, shifting the curve leftward.

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Description

Test your understanding of key concepts in Microeconomics Chapter 3 with these flashcards. Focus on the law of supply, supply curves, and other important definitions. Ideal for students looking to reinforce their economic knowledge.