Week 4a

Question 1

What is a competitive market?

Answer 1

Large number of buyers and sellers where no single buyer or seller can influence the price free product.

Question 2

What is demand?

Answer 2

The various quantities of a good or service that people will be willing and able to buy at various prices over a period of time

Question 3

What is individual demand

Answer 3

How much you want to buy of a good at a given price

Question 4

What is market demand?

Answer 4

How much each individual buys at a given price all summed up.

The quantity of demand by all buyers at a given price.

Question 5

What is demand schedule?

Answer 5

A tabular representation of demand

Question 6

What is a demand curve?

Answer 6

A graphical representation of demand

Question 7

The demand schedule and curve both show what.

Answer 7

The relationship between the price of a product and the quantity demanded of the product

Question 8

Quantity demanded refers to what?

Answer 8

A point in the demand curve at a specific price

Question 9

What is the law of demand?

Answer 9

It indicates that an inverse or negative relationship exists between the quantity demanded of a good and its price.

Question 10

Two reasons for the law of demand occurring?

Answer 10

Income effect

Substitution effect

Question 11

What is income effect?

Answer 11

A lower price means higher purchasing power and more people can buy the product.

Changing the price of a good changes the amount that can be purchased

Question 12

What is the substitution effect?

Answer 12

A change in the price of one good creates an incentive for a person to buy a substitute for that good.

Question 13

What is a change in quantity demanded?

Answer 13

It is triggered by a price change of a good and is represented by a movement ALONG the demand curve. The only thing that changes is price.

Question 14

What is a change in demand?

Answer 14

Caused by a factor that was held constant and is depicted by a shift in the demand curve.

Question 15

What are the 5 non-price variables that influence the demand curve?

Answer 15

Income
Prices of related goods
Tastes
Population and demographics
Expected future prices

Question 16

What is supply?

Answer 16

The various quantities of a good or service that forms are willing and able to offer for sale at various prices over a period of time.

Question 17

What is individual supply?

Answer 17

How much a firm is willing to produce at a given price

Question 18

What is market supply

Answer 18

The quantity supplied by all sellers over a given time period.

Question 19

Why is quantity supplied?

Answer 19

A point in the supply curve at a specific price

Question 20

What do both the supply curve and schedule show?

Answer 20

The relationship between the price of a product and the quantity supplied if the product when all other influences in selling plans are held constant.

Question 21

What is the law of supply?

Answer 21

Comes from basic economic theory that indicated that a positive or direct relationship exists between the quantity supplied of a good and its price

Question 22

What does the law of supply state?

Answer 22

When all other factors influencing the decision to sell are held constant, the higher the price of a good, the higher is the quantity supplied and vice versa.

Question 23

What changes the quantity supplied?

Answer 23

It’s triggered by an initial change in price of the good and moved along the supply curve

Question 24

What causes a change in supply?

Answer 24

Caused by a change in other factors other than price and is depicted by a shift in the supply curve.

Question 25

The joining of buyers and sellers creates…?

Answer 25

A market

Question 26

What is market equilibrium?

Answer 26

At the equilibrium price quantity demanded equals quantity supplied

Represents a balance in the marketplace

Question 27

What is a shortage?

Answer 27

Excess demand

Question 28

What is surplus?

Answer 28

Excess supply

Question 29

What 6 factors change supply?

Answer 29

1.Number of sellers
2.Prices of resources and other inputs
3.Productivity/ technology changes
4.Expectations of future input prices and future product prices
5.Price of related goods- substitutes and complements in production
6.Natural events

Question 30

How does the number of sellers change supply?

Answer 30

An increase in the number of suppliers increases supply

Question 31

How does prices of resources and other inputs change supply?

Answer 31

A decrease (increase) in the price of an input like raw materials will increase (decrease) supply

Question 32

How does productivity and technology change supply?

Answer 32

Technology changes increased efficiency of production; hence, a firm is able to produce more output using the same amount of inputs

Question 33

How does expectations of future input prices and future product prices change supply?

Answer 33

Expectations of higher (lower) future input prices and lower (higher) product prices will increase (decrease) supply now.

Question 34

How does price of substitute goods change supply?

Answer 34

A decrease (increase) in the price of a substitute product in production or an increase (decrease) in the price of a complement in production will increase (decrease) supply

Question 35

What is a substitute?

Answer 35

Alternative goods that can be produced using the same resources

Question 36

What is complements in production

Answer 36

Goods produced together using the same resources