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Econ Chapter 4
this is a review over chapter 4 in the third edition economy textbook
| Question | Answer |
|---|---|
| Supply | The amount of goods and services business firms are willing and able to provide at different prices. |
| Business firms | Include all sellers of goods and services, not just major corporations. |
| Law of supply | The higher the price buyers are willing to pay, other things being held constant, the greater the quantity of a product a firm will produce and that the lower the price consumers are willing to pay, the smaller the quantity the supplier will produce. |
| Change in quantity supplied | Occurs whenever a change in the price consumers are willing to pay causes a change in the number of goods produced and sold. |
| Changes in supply | Occurs when a supply curve goes left or right, signifying change. |
| Decrease in supply | A situation in which suppliers produce less of their product at any given price, resulting in a leftward shift of the supply curve. |
| Increase in supply | A situation that demonstrates the willingness business firms to produce more of their product at any given price, resulting in a rightward shift. |
| three things that determine changes in supply: | 1. CHanges in technology; 2. Changes in production costs; 3: changes in the price of related goods. |
| Changes in technology | Such changes represent a higher and more efficient production of goods, therefore resulting in a cheaper production, and a larger amount of demand. |
| Changes in production costs | Such changes effect the prices of production, therefore determining the changes in price consumers have to pay. |
| Changes in the Prices of Related Goods | Such changes happen when a business firm takes advantage of a customers great willingness to give up money for specific substitute goods. |
| Market equilibrium point | Represents the price at which consumers are willing to take from the market the exact quantity of a production that suppliers are willing to put into the market. |
| Alfred Marshall | Gave rise to the law of supply and demand, as well as created the supply and demand model and the supply and demand curve. |
| Market equilibrium price | The price at which the meeting of minds occurs between supply and demand. |
| surplus | An excess of unsold products that occurs anywhere exceeding the market equilibrium point. |
| Price floor | A barrier intended to prevent the prices of those items from falling below the market price. |
| Possible solutions to fixing a surplus: | 1. lower price of an item; 2. decrease the supply; 3: keep the price and supply the same, and hope for a shift to the right on the demand curve. |
| Shortage | Occurs whenever various factors hold the price of a good lower than the market equilibrium price. |
| price ceiling | Prevents prices from rising to the market equilibrium price. |
| Possible solutions to fixing a shortage: | 1. discourage demand for the product; 2. managing the supply; 3: allow the price of the good to rise to equilibrium. |
Created by:
hihello2007
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