Mod 3

Question 1

Command economy

Answer 1

Government decides what is produced and in which quantities

Question 2

Mixed economy

Answer 2

Private enterprises and the government provide goods and services

Question 3

Market Economy

Answer 3

Market participants (producers + buyers) decide what is produced

Question 4

Quantity demanded

Answer 4

Quantity buyers are willing to buy at a particular price during a specific period

Question 5

Demand schedule

Answer 5

Table that shows quantities of a good or service demanded at different prices during a period

Question 6

Demand curve

Answer 6

Present info in demand schedule in a graph

Question 7

Law of demand

Answer 7

The lower the price of a good, the larger the quantity consumers wish to purchase (all else equal)

Question 8

Market demand

Answer 8

Horizontal summation of demand curves of potential buyers in a market

Aggregate demand for all consumers

Question 9

Price elasticity of demand

Answer 9

How sensitive the quantity demanded is to a change in price

Question 10

Inelastic Demand

Answer 10

Change in price has relatively small effect on the quantity of a good demanded

Price increases → total expenditure increases

Question 11

Elastic Demand

Answer 11

Change in price has relatively large effect on the quantity of a good demanded

Price increases → total expenditure decreases

Question 12

Determinants of price elasticity (2)

Answer 12

Availability of substitutes

Time

Question 13

Normal good

Answer 13

Incomes rise → demand increases

Question 14

Inferior good

Answer 14

Incomes rise → demand decreases

Question 15

Complements

Answer 15

Goods consumed together

Consumption of both will rise or fall together due to price change

Question 16

Substitutes

Answer 16

Goods that replace each other

Question 17

Supply schedule

Answer 17

Table that shows quantity supplied at different prices

Question 18

Quantity supplied

Answer 18

Quantity sellers are willing to sell at a certain price during a certain period

Question 19

Supply curve

Answer 19

Shows relationships between price and quantity supplied

Question 20

Law of supply

Answer 20

The higher the price of a good, the larger the quantity firms want to produce (all else equal)

Question 21

Market supply

Answer 21

Aggregate supply of all producers

Horizontal summation of supply curves of potential sellers in a market

Question 22

Elastic Supply

Answer 22

Small change in price causes large increase in production

Question 23

Inelastic Supply

Answer 23

Small change in price causes small increase in production

Question 24

Surplus

Answer 24

Excess supply of a good due to price above equilibrium

Question 25

Shortage

Answer 25

Excess demand for a good due to price below equilibrium

Question 26

Equilibrium

Answer 26

Demand = Supply

Question 27

Price and quantity increase

Answer 27

Demand shifts out

Question 28

Price and quantity decrease

Answer 28

Demand shifts in

Question 29

Price decrease + quantity increase

Answer 29

Supply shifts out

Question 30

Price increase + quantity decrease

Answer 30

Supply shifts in

Question 31

Change in demand

Answer 31

Shift in a demand curve due to changes in non-price factors

Question 32

Non-price factors (demand) (5)

Answer 32

Preferences Price of related goods Income Demographic characteristics Buyer expectations

Question 33

Change in supply

Answer 33

Shift in a supply curve due to changes in non-price factors

Question 34

Non-price factors (supply) (6)

Answer 34

Price of inputs Opportunity cost of alternative activities Technology Seller expectations Natural events Taxes and subsidies

Question 35

Change in quantity demanded

Answer 35

Change in the amount buyers will purchase due to a change in price

Question 36

Change in quantity supplied

Answer 36

Change in the amount producers will sell due to a change in price

Question 37

Preferences

Answer 37

Feelings of consumers about the desirability of different goods

Question 38

Price elasticity of demand

Answer 38

How sensitive the quantity demanded is to a change in price

Question 39

Price elasticity of supply

Answer 39

How sensitive the quantity supplied is to a change in price

Question 40

Total expenditure

Answer 40

The total amount of money spent on a good or service at a given price (P x Q)