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
Chapter 4 Book
Micro
| Question | Answer |
|---|---|
| The terms supply and demand refer to | the behavior of people as they interact with one another in competitive markets. |
| a group of buyers and sellers of a particular good or service. The buyers as a group determine the demand for the product, and the sellers as a group deter-mine the supply of the product. | Market |
| . Some markets are highly organized, such as the mar-kets for agricultural commodities like wheat and corn. In these markets, buyers and sellers meet at a specific time and place. | . Buyers come knowing how much they are willing to buy at various prices, and sellers come knowing how much they are will-ing to sell at various prices. An auctioneer facilitates the process by keeping order, arranging sales, and (most importantly) findin |
| a market in which there are many buyers and many sellers so that each has a negligible impact on the market price | Competitive Market |
| The market for ice cream, like most markets in the economy, is highly competitive | Each buyer knows that there are several sellers from which to choose, and each seller is aware that his product is similar to that offered by other sellers |
| price and quantity | are determined by all buyers and sellers as they interact in the marketplace. |
| Each seller of ice cream has limited control over the price because | other sellers are offering similar products. A seller has little reason to charge less than the going price, and if he charges more, buyers will make their purchases else-where. Similarly, no single buyer of ice cream can influence the price of ice cream |
| To reach this highest form of competition, a market must have two characteristics: ( | (1) The goods offered for sale are all exactly the same, and (2) the buyers and sellers are so numerous that no single buyer or seller has any influence over the market price. |
| Local cable television, for instance, is a monopoly if residents of the town have only one company from which to buy cable service. Many other markets fall between the extremes of perfect competition and monopoly. | Monopoly |
| Perfectly competitive markets are the easiest to analyze because | everyone participating in them takes the price as given by market conditions |
| the amount of the good that buyers are willing and able to purchase. | quantity demanded |
| one determinant plays a central role: | the good’s price. If the price of ice cream rose to $20 per scoop, you would buy less ice cream. You might buy frozen yogurt instead. If the price of ice cream fell to $0.50 per scoop, you would buy more |
| Other things being equal, when the price of a good rises, the quantity demanded of the good falls, and when the price falls, the quantity demanded rises. | Law Of Demand |
| a table that shows the quantity demanded at each price | Demand schedule |
| , which graphs the demand schedule, illustrates how the quantity demanded of the good changes as its price varies | Demand Curve |
| a lower price | increases the quantity demanded, the demand curve slopes downward. |
| a table that shows the relationship between the price of a good and the quantity demanded, holding constant everything else that influences how much of the good consumers want to buy | Demand schedule |
| The line relating price and quantity demanded is called the | Demand Curve Definition |
| The demand curve slopes down-ward because, | other things being equal, a lower price means a greater quantity demanded |
| To analyze how markets work, we need to determine the market demand, which is | the sum of all the individual demands for a particular good or service. |
| . The market demand at each price is the | sum of the two individual demands. |
| the quantity demanded in a market is | the sum of the quantities demanded by all the buyers at each price. thus, the market demand curve is found by adding horizontally the individual demand curves. |
| we sum the individual demand curves _____ to obtain the market demand curve | horizontally |
| The market demand curve shows how the | how the total quantity demanded of a good varies as the price of the good varies, while all other factors that affect how much consumers want to buy are held constant |
| Because the market demand curve holds other things constant, it need not be stable over time. If something happens to alter the quantity demanded at any given price, | the demand curve shifts |
| suppose the American Medical Association discovers that people who regularly eat ice cream live longer, healthier lives. The discovery would raise the demand for ice cream. | At any given price, buyers would now want to purchase a larger quantity of ice cream, and the demand curve for ice cream would shift |
| At any given price, buyers would now want to purchase a larger quantity of ice cream, and the demand curve for ice cream would shift | right |
| Any change that lowers the quantity that buyers wish to purchase at any given price shifts the demand curve to the | left |
| Any change that increases the quantity demanded at every price, such as our imaginary discovery by the American Medical Association, shifts the demand curve to the right and is called an | Increase in demand |
| Any change that reduces the quantity demanded at every price shifts the demand curve to the left and is called a | decrease in demand |
| Changes in many variables can | shift the demand curve |
| A lower income means that you have less to spend in total, so you would have to spend less on some—and probably most—goods. If the demand for a good falls when income falls, the good is called a. | normal good |
| . If the demand for a good rises when income falls, the good is called an | inferior good |
| An example of an inferior good might be bus rides. As your income falls, | you are less likely to buy a car or take a cab and more likely to ride a bus. |
| When a fall in the price of one good reduces the demand for another good, the two goods are called | substitutes |
| Substitutes are often pairs of goods that are used in place of each other, such as | hot dogs and hamburgers, sweaters and sweatshirts, and movie tickets and film streaming services. |
| two goods for which an increase in the price of one leads to a decrease in the demand for the other | complements |
| . Economists normally do not try to explain people’s tastes because tastes are based on historical and psychological forces that are beyond the realm of economics. Economists do, however, examine what happens when tastes change. | tastes if you like ice cream you buy more of it |
| Your expectations about the future may affect your demand for a good or service today. If you expect to earn a higher income next month, you may choose to save less now and spend more of your current income on ice cream. If you expect the price of ice cr | expectations |
| In addition to the preceding factors, which influence the behavior of individual buyers, market demand depends on the number of these buyers. If Peter were to join Catherine and Nicholas as another consumer of ice cream, the quantity demanded in the mark | Number of buyers |
| The demand curve shows what happens to the quantity demanded of a good as its price varies, holding constant all the other variables that influence buyers. When one of these other variables changes, the quantity demanded at each price changes, and the de | Summary |
| A curve shifts when there is a change in a relevant variable that is | not measured on either axis. Because the price is on the vertical axis, a change in price represents a move-ment along the demand curve. |
| By contrast, income, the prices of related goods, tastes, expectations, and the number of buyers are | not measured on either axis, so a change in one of these variables shifts the demand curve |
| one way to reduce smoking is to | shift the demand curve for cigarettes and other tobacco products. Public service announcements, mandatory health warnings on cigarette packages, and the prohibition of cigarette advertising on television are all policies aimed at reducing the quantity of |
| A higher price encourages smokers to | reduce the number of cigarettes they smoke. In this case, the reduced amount of smoking does not represent a shift in the demand curve. Instead, it represents a movement along the same demand curve to a point with a higher price and lower quantity |
| if warnings on cigarette packages convince smokers to smoke less, the demand curve for cigarettes shifts to the | left |
| if a tax raises the price of cigarettes, the demand curve | does not shift |
| in figure 4b on page 68 when the price rises from $4 to $8, the quantity demanded | falls from 20 to 12 cigarettes per day, as reflected by the movement from point A to point c |
| of any good or service is the amount that sellers are willing and able to sell. | The quantity supplied |
| When the price of ice cream is high | selling ice cream is quite profitable, and so the quantity supplied is large. Sellers of ice cream work long hours, buy many ice-cream machines, and hire many workers |
| when the price of ice cream is low, the business is less profitable | so sellers produce less ice cream. At a low price, some sellers may even shut down, reducing their quantity supplied to zero. |
| the claim that, other things being equal, the quantity supplied of a good rises when the price of the good rises | law of supply |
| higher price increases the quantity supplied | supply curve slopes upward |
| a table that shows the relationship between the price of a good and the quantity supplied, holding constant everything else that influences how much of the good producers want to sell. | Supply Schedule |
| , market supply is | the sum of the supplies of all sellers |
| a table that shows the relationship between the price of a good and the quantity supplied | supply schedule, |
| graph of the relationship between the price of a good and the quantity supplied | supply curve |
| Because the market supply curve is drawn holding other things constant, when one of these factors changes, | the supply curve shifts |
| shifts in supply. Any change that raises quantity supplied at every price, such as a fall in the price of sugar, shifts the supply curve to the right and is called an | increase in supply |
| . If input prices rise substantially, a firm might shut down and supply no ice cream at all. Thus | the supply of a good is negatively related to the prices of the inputs used to make the good. |
| The technology for turning inputs into ice cream is another determinant of supply. The invention of the mechanized ice-cream machine, for example, reduced the amount of labor necessary to make ice cream. By reducing firms’ costs, the advance in technolog | technology |
| The amount of ice cream a firm supplies today may depend on its expectations about the future. For example, if a firm expects the price of ice cream to rise in the future, it will put some of its current production into storage and sup-ply less to the ma | Expectations |
| In addition to the preceding factors, which influence the behavior of individual sellers, market supply depends on the number of these sellers. . If Ben or Jerry were to retire from the ice-cream business, the supply in the market would fall. | Number of Sellers |
| The supply curve shows what happens to the quantity supplied of a good when its price varies, holding constant all the other variables that influence sellers. When one of these other variables changes, the quantity supplied at each price changes, and the | Summary |
| t a curve shifts only when there is a change in a relevant variable that is not named on either axis. | The price is on the vertical axis, so a change in price represents a movement along the supply curve. |
| a situation in which the market price has reached the level at which quantity supplied equals quantity demanded | equilibrium |
| Notice that there is one point at which the supply and demand curves intersect. This point is called the | markets equilibrium |
| The price at this intersection is called the equilibrium price, and the quantity is called the | equilibrium quantity. |
| the price that balances quantity supplied and quantity demanded | equilibrium price |
| the quantity supplied and the quantity demanded at the equilibrium price | equilibrium quantity |
| The equilibrium price is sometimes called the _________ because, at this price, everyone in the market has been satisfied: Buyers have bought all they want to buy, and sellers have sold all they want to sell. | market clearing price |
| the equilibrium is found where | the supply and demand curves intersect. |
| a situation in which quantity supplied is greater than quantity demanded | surplus |
| a situation in which quantity demanded is greater than quantity supplied | shortage |
| When there is a surplus in the ice-cream market, | sellers of ice cream find their freezers increasingly full of ice cream they would like to sell but cannot. |
| Falling prices, in turn, | increase the quantity demanded and decrease the quantity supplied. These changes represent movements along the supply and demand curves, not shifts in the curves. |
| The price of any good adjusts to bring the quantity supplied and quantity demanded of that good into balance. | the law of supply and demand |
| The equilibrium price and quantity depend on the positions of the supply and demand curves. | When some event shifts one of these curves, the equilibrium in the market changes, resulting in a new price and a new quantity exchanged between buyers and sellers. |
| When analyzing how some event affects the equilibrium in a market, we proceed in three steps First, we decide whether the event shifts the supply curve, the demand curve, or, in some cases, both | Second, we decide whether the curve shifts to the right or to the left. Third, we use the supply-and-demand diagram to com-pare the initial equilibrium |
| Notice that when hot weather increases | the demand for ice cream and drives up the price, the quantity of ice cream that firms supply rises, even though the supply curve remains the same. In this case, economists say there has been an increase in “quantity supplied” but no change in “supply. |
| refers to the position of the supply curve, whereas the quantity supplied refers to the amount producers wish to sell | supply |
| desire to buy at any given price and thereby shifts the demand curve to the right. The increase in demand causes the equilibrium price to | rise. When the price rises, the quantity supplied rises |
| Three Steps for Analyzing Changes in Equilibrium | 1. decide whether the event shifts the supply or demand curve (or perhaps both). 2. decide in which direction the curve shifts. 3. use the supply-and-demand diagram to see how the shift changes the equilibrium price and quantity. |
| An event that raises quantity demanded at any given price shifts the demand curve to the right. the equilibrium price and the equilibrium quantity both rise. | How an Increase in Demand Affects the Equilibrium |
| To summarize, a shift in the supply curve is called a | “change in supply,” |
| a shift in the demand curve is called a | change in demand |
| ” A movement along a fixed supply curve is called a “ | “change in the quantity supplied,” and a movement along a fixed demand curve is called a “change in the quantity demanded. |
| How a Decrease in Supply Affects the Equilibrium | An event that reduces quantity supplied at any given price shifts the supply curve to the left. the equilibrium price rises, and the equilibrium quantity falls. |
| Whenever an event shifts the supply curve, the demand curve, or perhaps both curves | you can use these tools to predict how the event will alter the price and quantity sold in equilibrium. Table 4 shows |
| Whenever you go to a store to buy something, you are | contributing to the demand for that item. Whenever you look for a job, you are contributing to the supply of labor services. |
| Market economies | harness the forces of supply and demand to serve that end. Supply and demand together determine the prices of the economy’s many different goods and services; prices in turn are the signals that guide the allocation of resources |
| consider the allocation of beachfront land. Because the amount of this land is limited, not everyone can enjoy the luxury of living by the beach. Who gets this resource? | The answer is whoever is willing and able to pay the price. The price of beachfront land adjusts until the quantity of land demanded exactly balances the quantity supplied. Thus, in mar-ket economies, prices are the mechanism for rationing scarce resource |
| prices determine | who produces each good and how much is produced. |
| the best definition of a market is | A group of buyers and sellers of a good or service. |
| in a perfectly competitive market | B - Every seller takes the price of its product as set by market conditions. |
| the market for which product best fits the definition of a perfectly competitive market? | eggs |
| A change in which of the following will Not shift the demand curve for hamburgers? | the price of hamburgers |
| Which of the following will shift the demand curve for pizza to the right? | |
| if pasta is an inferior good, then the demand curve shifts to the _________ when _________ rises. | |
| Which of the following moves the pizza market up along a given supply curve? | |
| Which of the following shifts the supply curve for pizza to the right? | |
| movie tickets and film streaming services are substitutes. if the price of film streaming increases, what happens in the market for movie tickets? | |
| he discovery of a large new reserve of crude oil will shift the _________ curve for gasoline, leading to a _________ equilibrium price. | |
| if the economy goes into a recession and incomes fall, what happens in the markets for inferior goods? | |
| Which of the following might lead to an increase in the equilibrium price of jelly and a decrease in the equilibrium quantity of jelly sold | |
| An increase in _________ will cause a movement along a given supply curve, which is called a change in _________. | supply, quantity demanded |
| factors that determine demand | -Price of a related good (complement or substitute) -Income of consumers -Tastes of consumers -Number of consumers -Expectations of consumer |
Created by:
jmccrar1145