Chapter 4 Section Reviews Flashcards Preview

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Flashcards in Chapter 4 Section Reviews Deck (11):
1

State the law of supply

The higher the price buyers are willing to pay, other things being constant, the greater the quantity a supplier will be willing to produce, and the inverse is true.

2

Which way does a supply curve slope and why?

To the right, which is a positive slope, indicating the greater the price buyers are willing to pay for the product, the greater quantity firms will supply.

3

What three factors could lead to a change in supply?

1. Changes in technology
2. Changes in production costs
3. Changes in the prices of related goods

4

At what point do supply and demand intersect?

The market equilibrium point

5

What occurs when the price of a product is higher than the price at which supply equals demand?

Surplus

6

What is the simplest solution to a surplus?

Producer lowers the price until the quantity demanded equals the quantity he has to supply.

7

What condition causes a shortage, and what are its possible
solutions?

A shortage is caused when a products price is lower than the market equilibrium price. The possible solutions are:
1. Discouraging demand for the product
2. Increasing the supply of the product
3. Allowing the price to rise to the equilibrium level

8

Who are suppliers?

All sellers of goods and services

9

What does a leftward shift in the supply curve indicate?

A decrease in supply

10

Do changes in technology cause an increase or a decrease in
supply?

Increase in supply

11

Alfred Marshall is best known for his model illustrating what
economic law?

Law of supply and demand