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econ midterm > Chapter 3 > Flashcards

Chapter 3 Flashcards

1
Q

What is a demand schedule?

A

A table that shows the relationship between the price of a product and the quantity of the product demanded

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2
Q

What is quantity demanded?

A

The amount of a good or service that a consumer is willing and able to purchase at a given price

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3
Q

What is a demand curve?

A

A curve that shows the relationship between the price of a product and the quantity of the product demanded

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4
Q

What is a market demand?

A

The demand by all consumers of a given good or service

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5
Q

What is the law of demand?

A

Holding everything else constant, when the price of a product falls, the quantity demanded of the product will increase, and when the price of the product rises, the quantity demanded of the product will decrease

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6
Q

What is the substitution effect?

A

The change in the quantity demanded of a good that results from a change in price making the good more or less expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power

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7
Q

What is the income effect?

A

The change in the quantity demanded of a good that results from the effect of a change in price on consumer purchasing power, holding all other factors constant

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8
Q

What is ceteris paribus?

A

The requirement that when analyzing the relationship between two variables - such as price and quantity demanded - other variables must be held constant.

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9
Q

Difference between a shift and a movement along a demand curve

A

A shift in a demand curve is an increase/decrease in demand non-relative to price and a movement along a demand curve is an increase/decrease in quantity demanded

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10
Q

What are 5 things that influence market demand?

A
  1. Income
  2. Price of related goods
  3. Tastes
  4. Population and demographics
  5. Expected future prices
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11
Q

What are normal goods?

A

Demand increases as income rises and decreases as it falls

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12
Q

What are inferior goods?

A

Demand increases as income falls and decreases as income rises

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13
Q

What are substitutes?

A

Goods and services that can be used for the same purpose

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14
Q

What are complements?

A

Goods and services used together

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15
Q

What are demographics?

A

The characteristics of a population with respect to age, race, and gender

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16
Q

True or False: Consumers make their purchases based on expected future prices

A

True

17
Q

What is quantity supplied?

A

The amount of a good or service that a firm = is willing and able to supply at a given price

18
Q

What happens to supply when prices of goods rise?

A

Producing the good is more profitable and quantity supplied will increase

19
Q

What is a supply schedule?

A

Table showing the relationship between a price of a product and the quantity supplied

20
Q

What is a supply curve?

A

A curve that shows the relationship between the price of a product and the quantity supplied

21
Q

What is the law of supply?

A

Holding everything else constant, increases in price causes increase in quantity supplied

22
Q

What are the 5 variables that affect market supply?

A
  1. Price of inputs
  2. Technological change
  3. Price of related goods in production
  4. Number of firms in the market
  5. Expected future prices
23
Q

What is technological change?

A

A positive or negative change in the ability of a firm to produce a given level of output with a given quantity of inputs

24
Q

How does the number of firms in the market effect supply?

A

The more firms there, the more supply there will be

25
Q

What does a higher future price say about supply?

A

Incentive to decrease supply now and increase in the future

26
Q

What is market equilibrium?

A

A situation in which quantity demanded equals quantity supplied

27
Q

What is competitive market equilibrium?

A

Market equilibrium with many buyers and sellers

28
Q

What is a surplus?

A

Quantity supplied is greater than quantity demanded

29
Q

What is a shortage?

A

Quantity demanded is greater than quantity supplied

30
Q

True or False: Firms can dictate what the equilibrium price will be in a competitive market

A

False

31
Q

What happens when demand shifts right?

A

There is an increase in equilibrium price and quantity

32
Q

What happens when supply shifts right?

A

There will be a surplus at the original equilibrium price

econ midterm (7 decks)

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