D. Supply and Demand

Question 1

Supply

Answer 1

(S) the quantity supplied at certain prices; different than quantity

Question 2

Demand

Answer 2

(D) attitude of those in the market buying

Question 3

Firm

Answer 3

business or organization (owned by an individual)

Question 4

Factor Markets

Answer 4

the exchange of inputs we produce

Question 5

Product markets

Answer 5

the exchange of goods and services

Question 6

Market power

Answer 6

a condition in which an individual or firm has an unfair advantage (decreases efficiency)

Question 7

Equal access to information

Answer 7

limits market power

Question 8

Pareto Optimality

Answer 8

a situation where there is no way to make someone better off without making someone worse off (highest efficiency)

Question 9

Elasticity

Answer 9

amount that demand responds to market conditions

Question 10

Inelastic

Answer 10

insignificant change in demand regardless of market conditions

Question 11

Necessity

Answer 11

a good for which there are no substitutes; more inelastic; e.g healthcare, gasoline

Question 12

Luxury

Answer 12

more elastic

Question 13

Factors that determine inelasticity

Answer 13

Necessity vs. luxury
Price and quantity of available substitutes
Time frame
Price relative to wealth and income

Question 14

Measuring elasticity

Answer 14

ϵ = % of quantity change  
% of price change
ϵ<1 then inelastic 
ϵ>1 then elastic 
ϵ=0 then perfectly inelastic
ϵ= 1 then unitary elasticity

Question 15

Unitary elasticity

Answer 15

percentage change in quantity and price are equal

Question 16

Total revenue

Answer 16

price X quantity

Question 17

Price sensitive

Answer 17

significantly elastic demand in which demand is more dependent on price

Question 18

Shift variables

Answer 18

factors that alter changes in demand

Question 19

Price of related goods

Answer 19

a variable that is impacted by complements and substitutes (related goods)

Question 20

Complements

Answer 20

items that are often consumed together (e.g. french fries & ketchup)

Question 21

Substitutes

Answer 21

goods that can replace the utility of another good (e.g. Pepsi & Coke)

Question 22

Cross price elasticity

Answer 22

how much a quantity demand change in one good impacts the price of another good

Question 23

income elasticity (of demand)

Answer 23

how much the quantity demanded of a good of services changes as a result of income

Question 24

Normal goods

Answer 24

any good in which demand increases as income increases

Question 25

Inferior goods

Answer 25

any good in which demand decreases as income increases

Question 26

market demand

Answer 26

sum of the individual demands for a product from buyers in the market