Chapter 4: The Market Forces of Supply and Demand - Questions

A shift in demand occurs when

Factors like income, preferences, or expectations change demand

Market demand is

The sum of all individual consumer demands

The demand curve has a

Negative slope because higher prices decrease demand.

The law of demand states that

The higher the price, the lower the quantity demanded.

Price takers

Have no control over prices

A monopoly is a market structure where:

A single producer controls the entire market

A perfectly competitive market has:

Identical products and many sellers

The demand curve slopes

Downward

If income increases, demand for normal goods

 Increases

Complementary goods are

Consumed together

Price takers are market participants who have ______________ influence on the price level.

No

A monopoly occurs when a ______________ producer controls the entire market.

Single

The law of demand states that as the price increases, the quantity demanded ______________.

Decreases

The demand curve has a ______________ slope because price and demand have an inverse relationship.

Negative

The higher the income, the ________ the quantity demanded.

Greater

What are the key features of a perfectly competitive market?

Many sellers and buyers, identical product and no barriers for exit and entry.

What factors can cause a shift in demand?

Changes in price, income, tastes, preferences, expectations, number of buyers, and prices of substitute or complementary goods.

Name factors that influence demand.

Price, tastes and preferences, price of substitute products, brand loyalty

The law of supply states that as price increases, supply

Increases

The supply curve has a

Positive slope

A surplus occurs when

Supply is greater than demand

What happens when input costs increase

Supply decreases

An equilibrium price suggests

Demand and supply are equal

An improvement in technology will

Increase supply

Equilibrium price is also called

Market-clearing price

If the price of a product falls, what will likely happen to the quantity supplied?

It will decrease

If a firm expects prices to rise in the future, what will it do today?

Decrease supply

When the market reaches equilibrium, what happens?

There is no shortage or surplus

The law of supply states that as price increases, the quantity supplied ______________.

Increases

A ______________ occurs when the quantity supplied exceeds the quantity demanded.

Surplus

A ______________ occurs when the quantity demanded exceeds the quantity supplied.

Shortage

If producers expect higher future prices, they will ______________ supply today.

Decrease

The supply curve slopes ______________.

Upward

A sudden price increase after a demand shock is called ________.

Price gouging

What is the law of supply?

As price increases, the producers increase the quantity supplied.

What is market supply?

Sum of all individual producers' supplies.

How does an increase in production costs affect supply?

It will decrease the supply since it is now costlier to produce.

Why does an improvement in technology increase supply?

It lowers production cost and makes it more efficient.

What happens when supply is greater than demand?

Surplus occurs, signaling that the current market price is too high.