Chapter 3

Question 1

Market

Answer 1

interaction between buyers and sellers, this interaction discovers price

Question 2

Demand

Answer 2

consumers are willing and able to purchase at a given price

Question 3

Law of Demand

Answer 3

price and quantity demand are inversely related

Question 4

Law of Diminishing Marginal Utility

Answer 4

the more is bought the less satisfaction is received

Question 5

Substitution effect

Answer 5

substitute a good for something cheaper as price for original good increases

Question 6

Normal goods

Answer 6

income increases, demand for this increases

Question 7

Inferior good

Answer 7

income increases demand decreases

Question 8

Determinants of Demand

Answer 8

Change in Income, consumer taste, number of buyers, price of related goods and expected future price

Question 9

Supply

Answer 9

follows price directly

Question 10

Determinants of Supply

Answer 10

Change in resource price, technology, number of sellers, taxes, price of other goods, producer expectation

Question 11

Market Equilibrium

Answer 11

where supply curve and demand curve intersect

Question 12

Productive Efficiency

Answer 12

producing a good in the least costly way

Question 13

Allocative Effeciency

Answer 13

people getting what they want