Chapter 3: Demand and Supply

Question 1

Change In Demand

Answer 1

change in buyers’ plans that occurs when some influence on those plans other than the price of the good changes. It is illustrated by a shift of the demand curve.

Question 2

Change In Supply

Answer 2

change in sellers’ plans that occurs when some influence on those plans other than the price of the good changes. It is illustrated by a shift of the supply curve.

Question 3

Change In The Quantity Demanded

Answer 3

change in buyers’ plans that occurs when the price of a good changes but all other influences on buyers’ plans remain unchanged. It is illustrated by a movement along the demand curve.

Question 4

Change In The Quantity Supplied

Answer 4

change in sellers’ plans that occurs when the price of a good changes but all other influences on sellers’ plans remain unchanged. It is illustrated by a movement along the supply curve.

Question 5

Competitive Market

Answer 5

market that has many buyers and many sellers, so no single buyer or seller can influence the price.

Question 6

Complement

Answer 6

good that is used in conjunction with another good.

Question 7

Demand

Answer 7

entire relationship between the price of the good and the quantity demanded of it when all other influences on buyers’ plans remain the same. It is illustrated by a demand curve and described by a demand schedule.

Question 8

Demand Curve

Answer 8

curve that shows the relationship between the quantity demanded of a good and its price when all other influences on consumers’ planned purchases remain the same.

Question 9

Equilibrium Price

Answer 9

price at which the quantity demanded equals the quantity supplied.

Question 10

Equilibrium Quantity

Answer 10

quantity bought and sold at the equilibrium price.

Question 11

Inferior Good

Answer 11

good for which demand decreases as income increases.

Question 12

Law of Demand

Answer 12

other things remaining the same, the higher the price of a good, the smaller is the quantity demanded of it; the lower the price of a good, the larger is the quantity demanded of it.

Question 13

Law of Supply

Answer 13

other things remaining the same, the higher the price of a good, the greater is the quantity supplied of it; the lower the price of a good, the smaller is the quantity supplied.

Question 14

Money Price

Answer 14

number of dollars that must be given up in exchange for a good or service.

Question 15

Normal Good

Answer 15

good for which demand increases as income increases.

Question 16

Quantity Demanded

Answer 16

amount of a good or service that consumers plan to buy during a given time period at a particular price.

Question 17

Quantity Supplied

Answer 17

amount of a good or service that producers plan to sell during a given time period at a particular price.

Question 18

Relative Price

Answer 18

ratio of the price of one good or service to the price of another good or service. A relative price is an opportunity cost.

Question 19

Substitute

Answer 19

good that can be used in place of another good.

Question 20

Supply

Answer 20

entire relationship between the price of a good and the quantity supplied of it when all other influences on producers’ planned sales remain the same. It is described by a supply schedule and illustrated by a supply curve.

Question 21

Supply Curve

Answer 21

curve that shows the relationship between the quantity supplied of a good and its price when all other influences on producers’ planned sales remain the same.