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Throck Eco Ch 7 2011
Throck Eco Ch 7 2011 Test Review
| Question | Answer |
|---|---|
| According to the law of demand, when the price of an item increases, what happens to quantity demanded? | it decreases or falls |
| According to the law of supply, higher prices cause producers to do what? | increase the supply |
| What type of relationship exists between price and quantity demanded? | inverse |
| What type of relationship exists between price and quantity supplied? | direct |
| What affects the quantity demanded of a product, and is illustrated on a curve as a shift a long the line? | price |
| What refers to the fact that additional satisfaction declines as additional units of an item are consumed? | law of diminishing marginal utility |
| If the price of a product is above its equilibrium price, what happens? | a surplus, as people do not buy as much of the product and producers make more because the price is high |
| If the price of a product is below its equilibrium price, what happens? | a shortage occurs as people buy more and more, and producers make less because the price is low |
| What "effect" says that if two items satisfy the same need and the price of one increases (such as DVDs and blue rays), people will buy the lower priced item. | substitution effect |
| If the population increases, what happens to demand for most products? | it increases |
| What direction does a a supply and demand curve shift if there is a decrease? | to the left |
| When a product becomes a fad, what happens to demand? | it increases and the curve shifts to the right |
| List some goods/services that have an inelastic demand. (meaning demand isn't affected by price) | medicine, sugar, salt, pepper, heart surgery |
| If two items are complimentary goods, such as peanut butter and jelly, how will a decrease in the price of peanut butter affect jelly? | demand will increase |
| If technology increases, what happens to supply? | increases |
| If the price of inputs (land, labor, capital) increases, what will happen to supply? | decrease |
| If taxes increase, what will happen to supply? | decrease |
| If government subsidies increase, what will happen to supply? | increase |
| What determines equilibrium price? | interaction of supply and demand |
| When a change in the price of an item leads to a larger change in quantity demanded, what is the demand? | elastic, such as with Cokes and steaks. |
| What two things mainly determine how much of an item you will buy? | price and your income |
| What is elasticity? | measure of consumer's responsivemnss to an increase or decrease inprice |
| When two items satisfy the same need, what are they called? | substitutes |
| What rule states that as the price of an item increases you cannot continue to buy the same amount if your income stays the same? | real income effect |
| What is the equilibrium price? | price at which producers and buyers agree to. |
| What is the process of freely exchanging goods and services through voluntary exchange? | market |
| tables showing either quantity supplied or demanded at every possbile price are called what? | schedules |
| What happens to equilbirium price is supply increases? | it decreases |
| What happens to the equilbrium price if demand increases? | increases |
| If the quantity demanded is higher than the quantity supplied, what happens? | shortages |
| If prices are expected to decrease, what happens to current demand? | decreases |
| What does a supply curve look like? | upward sloping line |
| What does a demand curve look like? | downward sloping line |
| Draw a diagram of a supply and demand curve and label the lines S1 and D1. | |
| Draw a supply and demand curve and mark the equilibrium price. | . |
| Draw and supply and demand curve, and illustrate what happens to the equilbrium price if overall demand increases. | . |
| If price is the only thing to change, what happens to the supply or demand curve? | it will be seen as movement along the curve, from point to point |
| What happnens to supply and demand curves if something other than price affects the supply or demand? (so quantity supplied or demanded changes at every possible price) | the entire curve will shift left or right |
Created by:
davislauren
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