ecn ch.4 supply and demand

market

group of buyers and sellers of a particular good and service

competitive market

market in which there are many buyers and many sellers so each has a negligible impact on the market price

perfectly competitive market

goods offered for sale are all exactly the same. the buyers and seller are so numerous that no single buyer or seller has any influence over the market

price taker

buyers and sellers in perfectly competitive markets must accept the price the market determines

each seller takes the price of its products as set by market conditions

in a perfectly competitive market

a. each seller tries to distinguish itself by offering a better product than its rivals

b. each seller takes the price of its products as set by market conditions

c. each seller tries to undercut the prices charged by its rivals

d. one seller has successfully outcompeted it rivals, so no other sellers remain

eggs

the market for which product best fits the definition of a perfectly competitive market

a. eggs

b. tap water

c. movies

d. computer operating system

quantity demand

the amount of a good that buyers are willing and able to purchase

law of demand

the claim that, other things being equal, the quantity demanded of a good falls when the price of the good rises

demand schedule

a table that shows the relationship between the price of a good and the quantity demanded

demand curve

a graph of the relationship between the price of a good and the quantity demanded

market demand

the sum of all individual demand for a particular good or service

increase in demand

shifts the demand curve to the right is called ________

decrease in demand

change that reduces the quantity demanded at every price shift the demand curve to the left and is called ______

normal good

a good for which, other things being equal, an increase in income leads to an increase in demand

inferior good

a good for which, other things being equal, an increase in income leads to a decrease in demand (demand for something rises when income falls)

substitutes

two goods for which an increase in the price of one leads to an increase in the demand for the other

compliments

two goods for which an increase in the price of one leads to a decrease in the demand for the other

the price of hamburgers

a change in which of the following will NOT shift the demand curve for hamburgers

a. the price of hot dogs

b. the price of hamburgers

c. the price of hamburger buns

d. the income of hamburger consumers

an increase in the price of hamburgers, a substitute for pizza

which of the following will shift the demand curve for pizza to the right

a. an increase in the price of hamburgers, a substitute for pizza

b. an increase in the price of root beer, a comprehensive to pizza

c. the departure of college students, as they leave for summer vacation

d. a decrease in the price of pizza

left; consumers income

if pasta is an inferior good, then the demand curve shifts to the ______ when ______ rises

a. right; the price of pasta

b. right; consumers income

c. left; the price of pasta

d. left; consumer's income

quantity supplied

the amount of a good that sellers are willing and able to sell

law of supply

the claim that, other things being equal, the quantity supplied of a good rises when the price of the good rises

supply schedule

a table that shows the relationship between the price of a good and the quantity supplied

supply curve

a graph of the relationship between the price of a good and the quantity supplied

an increase in the price of pizza

what event moves pizza supplies along a given supply curve

a. an increase in the price of pizza

b. an increase in the price of root beer, a complement to pizza

c. a decrease in the price of cheese, an input to pizza

d. a kitchen fire that destroys a popular pizza joint

a decrease in the price of cheese, an input to pizza

what event shifts the supply curve for pizza to the right

a. an increase i the price of pizza

b. an increase in the price of root beer, a complement to pizza

c. a decrease in the price of cheese, an input to pizza

d. a kitchen fire that destroys a popular pizza joint

the demand curve shifts to the right

movie tickets video streaming services are substitutes. If the price of video streaming increases, what happens in the market for movie tickets

a. the supply curve shifts to the left

b. the supply curve shifts to the right

c. the demand curve shifts to the left

d. the demand curve shifts to the right

equilibrium

a situation in which the market price has reached the level at which the quantity supplied equals the quantity demanded

equilibrium price

the price that balances the quantity supplied and the quantity demanded

equilibrium quantity

the quantity supplied and the quantity demanded at the equilibrium price

surplus (sometimes called excess supply)

a situation in which the quantity supplied is greater than the quantity demanded

shortage (sometimes called (excess demand)

a situation in which the quantity demanded is greater than the quantity supplied

law of supply and demand

the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded of that good into balance

change in supply

shift in the supply curve is called _____

change in demand

shift in the demand curve is called ______

change in the quantity supplied

a movement along a fixed supply curve called ______

change in the quantity demanded

movement along fixed demand curve is called ______

supply; lower

the discovery of a large new reserve of crude oil will shift the _______ curve for gasoline, leading to a _______ equilibrium price

a. supply; higher

b. supply; lower

c. demand; higher

d. demand; lower

an increase in the price of grapes, an input into jelly

what event might lead to an increase in the equilibrium price of jelly and a decrease in the equilibrium quantity of jelly sold

a. an increase in the price of peanut butter, a compliment to jelly

b. an increase in the price of marshmallow fluff, a substitute for jelly

c. an increase in the price of grapes, an input into jelly

d. an increase in consumer’s incomes, as long as jelly is a normal good

prices and quantities both rise

if the economy goes into a recession and income fall, what happens in the markets for inferior goods

a. prices and quantities both rise

b. prices and quantities both fall

c. prices rise; and quantities fall

d. prices fall, and quantities rise

demand; quantity supplied

an increase in _____ will cause a movement along a given supply curve, which is called a change in ____

a. supply; demand

b. supply; quantity demanded

c. demand; supply

d. demand; quantity supplied