Help
Options
Didn't know it?
click below
click below
Knew it?
click below
click below
Don't Know
Remaining cards (0)
Know
retry
shuffle
restart
0:00
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.
Normal Size Small Size show me how
Normal Size Small Size show me how
Arnold Economics 3
Economics by Arnold Chapter 3
| Question | Answer |
|---|---|
| Define "Ceteris Paribus" | Everything else the same or all other factors constant. |
| True or False: "Demand is the amount of a good that buyers wish to purchase" | False - demand is not a particular quantity. |
| Define "Demand by an individual" | A schedule of prices and quantities showing the maximum amount that the particular individual would like to purchase at each price. |
| Define the "Law of Demand." | As the price decreases the amount the buyer wishes to purchase increases. That is, the demand curve is downward sloping (inverse relationship). |
| True or False: "Demand, Demand Curve and Demand Schedule all mean the same thing." | True |
| Define "Absolute Price." | The price of a good in terms of money (Dollars, Euros, Yen, etc) |
| Define "Relative Price." | The price of a good in terms of other goods. |
| Which price, Absolute Price or Relative Price, is important to buyers and sellers? | Relative Price |
| Define the "Law of Diminishing Marginal Utility." | As an individual consumes more of a good the marginal utility of the good will fall. |
| Define "Market Demand." | It is simply the sum of the individual demand curves by all of the buyers in a market. |
| Define "Quantity Demanded." | It is the specific quantity that will be purchased at a specific price. |
| True or False: "A rise in price will decrease demand." | False - a change in price will affect Quantity Demanded but it will have no effect on Demand (i.e. Demand Curve). Instead you will simply move along a given demand curve. |
| How would you graphically illustrate a change in demand? | By a shift in the demand curve. |
| How would you graphically represent an increase in demand? | The demand curve would shift to the right. |
| Why is a rightward shift in the demand curve an increase in demand? | Because at each price the quantity demanded is greater. |
| How would you graphically represent a decrease in demand? | The demand curve would shift to the left. |
| How will a change in income affect demand? | It depend on whether the good is a normal good (superior good), an inferior good or a neutral good. |
| What is a normal good (superior good)? | A good whose demand rises as income rises. |
| What is an inferior good? | A good whose demand falls as income rises. |
| What is a neutral good? | A good whose demand is unaffected as income rises (or falls). |
| What is a substitute for good x? | Any good that can be used in place of good x. It satisfies the same want. |
| How will an increase in the price of a substitute affect the demand for good x? | The demand for good x will increase (because consumers will shift from the substitute to good x). |
| What is a complement for good x? | Any good that is used together with good x. |
| How will an increase in the price of a complement affect the demand for good x? | The demand for good x will decrease. |
| How will the number of buyers affect the market demand for good x? | The more buyers the greater the market demand. |
| If buyers expect the future price of good x to increase how will this affect the current demand for x? | The current demand will increase (buy the good now when you think the price is relatively low). |
| True or False: "Supply is the amount that sellers wish to sell." | False - supply is not a specific amount. |
| Define "Supply by an individual" | A schedule of prices and quantities showing the maximum amount that the particular individual would like to sell at each price. |
| Define the "Law of Supply" | As the price decreases the amount the seller wishes to sell increases. That is, the supply curve is upward sloping (direct relationship). |
| True or False: "Supply, Supply Curve and Supply Schedule all mean the same thing." | True |
| Define "Market Supply." | It is simply the sum of the individual supply curves by all of the sellers in a market. |
| Why is the supply curve upward sloping? | Because of the Law of Increasing Opportunity Cost. |
| Define "Quantity Supplied." | It is the specific quantity that will be sold at a specific price. |
| True or False: "An increase in price will cause an increase in supply." | False - a change in price will affect the quantity supplied but not the supply (supply curve). |
| How would you graphically represent a change in supply? | By a shift in the supply curve. |
| True or False: "An increase in supply would be represented by a shift up of the supply curve." | False - An increase in supply would be represented by a shift to the right (or down). |
| How will an increase in the price of an input affect supply? | Supply would decrease (shift left or up). |
| How would an increase in the technology of production affect supply? | Supply would increase (shift right or down). |
| How will an increase in the number of sellers affect the market supply? | Supply would increase. |
| Suppose a farmer could grow either corn or beans. If the price of corn increases what would happen to the supply of beans? | Supply would decrease (farmers would be less willing to grow beans because of the higher price of corn). |
| If sellers expect the future price of good x to increase what would happen to the current supply? | Supply would decrease (sellers would prefer to wait and sell later at the higher expected price). |
| How would a per unit tax on sellers affect supply? | Supply would decrease. |
| How would a per unit subisdy (money paid to the seller for each unit sold) affect supply? | Supply would increase. |
| What is a "Surplus"? | When the quantity supplied is greater than the quantity demanded. |
| What is a "Shortage"? | When the quantity demanded is greater than the quantity supplied. |
| If the price is greater than the market equilibrium this will create a shortage or a surplus? | Surplus |
| Define "Consumer Surplus." | The net gain to the buyer from trade. CS = maximum price the buyer is willing to pay - price they actually pay |
| Define "Seller Surplus." | The net gain to the seller from trade. SS = price the seller actually receives - minimum price they would have accepted. |
| If supply is constant and demand increases, what will happen to price and quantity? | Both increase. |
| If demand is constant and supply increases, what will happen to price and quantity? | Price falls and quantity increases. |
| If supply is constant and demand decreases, what will happen to price and quantity? | Both decrease. |
| If demand is constant and supply decreases, what will happen to price and quantity? | Price increases and quantity falls. |
| Define a "Price Ceiling." | It is a government mandated maximum price. No legal trades are allowed to occur above this price. |
| What are some of the possible consequences of a price ceiling? | (1) shortages, (2) fewer exchanges, (3) the use of nonprice rationing devices, (4) black market [illegal, off-the-book transactions] trades, (5) tie-in sales [two products are sold together - in this case to circumvent the price ceiling]. |
| Define a "Price Floor." | A government mandated minimum price. |
| What are some of the possible consequences of a price ceiling? | (1) surpluses, (2) fewer exchanges, (3) reduction in product quality. |
Created by:
bscollier
Popular Economics sets