ECON ch 3- EXAM#1

Question 1

in a perfect competitive market everyone is

Answer 1

a price taker

Question 2

what type of market sells a homogenous good with many buyers and sellers, and with no market power

Answer 2

competitive market

Question 3

the markets in which goods and services are exchanged

Answer 3

output markets (G&S markets)

Question 4

the markets in which resources (labor, capital, land) are exchanged

• households
• entrepreneurships

Answer 4

input markets (factor markets)

Question 5

the market in which households supply work for wages to firms that demand labor

Answer 5

labor market (input)

Question 6

the market in which households supply their savings, for interest or for future profits, to firms that demand funds to buy capital goods

Answer 6

the financial- capital market (input)

Question 7

households play 2 roles

Answer 7

1. consuming units (buyers) in the markets for outputs

2. supplying units in the market for inputs (labor)

Question 8

organizations that transforms resources (inputs) into goods and services (outputs)

Answer 8

business firms

Question 9

firms play 2 roles

Answer 9

1. consuming units in the market for inputs

2. supplying units in the market for outputs

Question 10

demand shifters (5)

Answer 10

• income
• population (# of buyers)
• preferences
• prices of compliments/substitutes
• expectations

Question 11

law of demand

Answer 11

the theory according to which the QD of a good falls when the P of a good rises

Question 12

shifters are also known as

Answer 12

non-price determinants

Question 13

“other things equal” =

Answer 13

= “ceteris paribus”

Question 14

a table showing the relationship between the price and the QD of the analyzed goods (lattes)

Answer 14

demand schedule

Question 15

are movements along the demand curve caused by a change in the price of the analyzed good.
changes in what

Answer 15

changes in the QD

Question 16

a shift of the demand curve caused by changes in shifters (income, price of related goods, expectations)
changes in what

Answer 16

changes in demand

Question 17

demand curve shifters

-shift to right

Answer 17

increases

Question 18

demand curve shifters

-shift to the left

Answer 18

decreases

Question 19

normal goods

Answer 19

are goods for which demand increases (right shift) when income goes up (and for which demand decreases when income goes down)

Question 20

inferior goods

Answer 20

are goods for which demand decreases (left shift) when income goes up (and for which demand increases when income goes up)

Question 21

demand for normal increases

Answer 21

income increases

Question 22

demand for inferiors decreases

Answer 22

income increases

Question 23

substitutes: when price increases, demand

Answer 23

demand increases

Question 24

compliments: when price increases, demand

Answer 24

demand decreases

Question 25

anything that causes a shift in tastes toward a good will increase demand for that good and shifts its demand curve to the right

Answer 25

preferences

Question 26

affect consumers` buying decisions

Answer 26

expectations

Question 27

price causes

Answer 27

price causes a movement along the same demand (only QD changes)

Question 28

shifts the demand curve (5)

Answer 28

income, population, price of related GS, tastes, expectations

Question 29

determinants of supply curve (5)

Answer 29

- price of the analyzed GS - the cost of producing the good, which in turn, depends on price of inputs - technology - # of firms producing and selling the GS - expectations

Question 30

law of supply

Answer 30

the theory according to which the QS of a good increases when the price of the good rises

Question 31

an increase in the # of sellers increases the QS at each price, shifts the supply curve to

Answer 31

to the right

Question 32

the tendency in a free market for the price to change until the market clears (reaches equilibrium)

Answer 32

the market mechanism

Question 33

QS=QD

Answer 33

equilibrium

Question 34

two types of market disequilibria

Answer 34

1. excess demand (shortage) | 2. excess supply (surplus)

Question 35

when QS is greater than QD

Answer 35

surplus

Question 36

when QD is greater than QS

Answer 36

shortage

Question 37

a change in demand: | price goes up

Answer 37

demand increases - quantity goes up - price goes up

Question 38

a change in supply: | technology improves

Answer 38

produce more, so P goes down and Q goes up

Question 39

demand decreases

Answer 39

P and Q decreases (shift left)

Question 40

supply increases

Answer 40

P decreases and Q increases (shift right)

Question 41

demand increases

Answer 41

P and Q increases (shift right)

Question 42

supply decreases

Answer 42

P increases and Q decreases (shift left)

Question 43

demand decreases and supply increases

Answer 43

P decreases and Q either

Question 44

demand increases and supply decreases

Answer 44

P increases and Q either