Chapter 3: Demand, Supply, And Market Equilibrium

Question 1

What is a Firm?

Answer 1

It is whem a person or a group of people create a product or products by transforming inputs (resources) into outputs (products or services) to a market.

Question 2

What are Households?

Answer 2

They are the consuming units of an economy.

Question 3

What is a Product or Output Market?

Answer 3

It is when the goods and services that are intended to be used by households are exchanged.

Question 4

What are Input or Factor Markets?

Answer 4

The markets in which resources used to produce goods and services exchanged.

Question 5

What are Labor Markets?

Answer 5

The input/factor market in which households supply work for wages to firms that demand labor.

Question 6

What is a Capital Market?

Answer 6

The input/output factor market in which households supply their savings for interest or for claims to future profits, to firms that demand funds to buy capital goods.

Question 7

What are the 3 ways that Households supply resources to a firm?

Answer 7

1. Labor Market
2. Capital Market
3. Land Market

Question 8

What are the 3 Factors of Production?

Answer 8

1. Land
2. Labour
3. Capital

Question 9

What is The Law of Demand?

Answer 9

This negative relationship between price and quantity demanded.

Question 10

What is Quantity Demanded?

Answer 10

It is the amount (# of units) of a product that a household would buy in a given period.

Question 11

What is Ceteris Paribus?

Answer 11

It means “all else equal.”

Question 12

What is a Demand Schedule?

Answer 12

It shows how much of a product a person or household is willing to purchase per time period (each week or month) at different prices.

Question 13

What are Normal goods?

Answer 13

Goods for which demand goes down when income decreases and goods for which demand goes up when income increases.

Question 14

What are Inferior Goods?

Answer 14

Goods for which demand tends to fall when income rises.

Question 15

What are the Determinants of Household Demand?

Answer 15

1. Income and Wealth
2. Substitutes
3. Tastes and Preferences
4. Expectations

Question 16

What are Normal Goods?

Answer 16

Goods for which demand increases when income increases and Goods for which demand decreases when income decreases.

Question 17

What are Inferior Goods?

Answer 17

Goods for which demand decreases when income rises.

Question 18

What is Shift of Demand?

Answer 18

It is when an individual or an household’s influence demands change due to factors such as income or preferences.

Question 19

What is Movement Along a Curve?

Answer 19

It is when the price of a product changes along the demand curve.

Question 20

What is a Market Demand?

Answer 20

It is simply the sum of all the quantities of a good or service demanded per period by all the households buying in the market for that good or service.

Question 21

What is Quantity Supplied?

Answer 21

It is the amount of a particular product that firms would be willing and able to offer for sale at a particular price during a given time period.

Question 22

What is a Supply Schedule?

Answer 22

It shows how much of a product firms will sell at alternative prices.

Question 23

What is Movement along a Supply Curve?

Answer 23

The change in quantity supplied brought about a change in price.

Question 24

What is Shift of Supply?

Answer 24

When factors other than price change happen.

Question 25

What is Market Supply?

Answer 25

It is the sum of quantity of products and services supplied by a firm/producer for each period.

Question 26

What is Market Equilibrium?

Answer 26

It is when the quantity demanded is equal to the quantity supplied.