Econ Quiz 3

Demand Schedule

The relationship that exists between the price of a good and the quantity demanded of that good, at a given time and keeping all other things constant.

Demand Curve

A graphical representation of the demand schedule.

The Law of Downward-sloping demand:

People will purchase more of a good at a lower price, all other things equal (ceteris paribus)

Movements along the demand curve are known as

changes in the quantity demanded

The only factor that affects the quantity demanded

the price of the good/service in question.

Factors that affect the demand schedule (cause shifts of the demand curve)

• Market size

• Income

• Tastes & Preferences

• Prices of Related Goods

• Special factors

• New Inventions

• Expectations

Supply schedule

the relationship that exists between the price of a good and the quantity of the good that is offered for sale, at a given time and keeping all other things constant (ceteris paribus)

The supply curve

A graphical presentation of the supply schedule.

Movements along the supply curve are known as

changes in the quantity supplied.

The only factor that affects the quantity supplied

The price of the good/service in question.

Shifts of the supply curve are known as

change in supply

Factors that affect the supply schedule (cause shifts of the curve)

• Production costs (as production costs increase, supply decreases)

• Government policy

• Prices of related goods

• Special factors

• Innovation and other production options

• Expectatios

The substitution effect

When the price of one product changes, we either buy more (price drops) or substitute and spend on a different brand (price rises).

The income effect

When the price of one product increases, we have less ability to buy that product.

T/F: If an economy produces more capital goods today, then it will be able to produce more goods in the future, which is captured by a shifting out of its PPF.

True